The insurance company tries to set your claim’s value immediately upon receiving notice of the bodily injury, death, or property loss.
This number – the insurance claim reserve – controls the settlement offers you receive, no matter your insurance claim type. Indeed, claim reserves affect payments in workers compensation, auto accident, product liability, premises liability, and property damage cases.
Fortunately, you can take steps to help the insurer set a claim reserve amount that reflects the actual value of your case.
This article explains how insurers set reserves and what information you should provide the claims adjuster (and when) to influence the insurer’s cost estimate for the claim so that a fair settlement is possible. Indeed, the adjuster, claims supervisor, and insurance defense attorney may rely on you to set the proper reserve. And you can take advantage of this.
Use these tips to affect the claim reserve in every insurance claim, whether first-party or third-party liability insurance.
Keep reading to learn more about how insurers handle claims and determine settlement offers.
Then call our law firm if you have questions about your claim: 804-251-1620 or 757-810-5614. Let’s start on the path to a complete physical, mental, and financial recovery.
When an insurance company gets notice of a claim, it must set aside funds to cover the potential cost to settle that claim.
The specific amount of money the insurer sets aside to satisfy the potential loss exposure of a given claim is called the claim reserve. vir
The insurer cannot use this money held in reserve for claims for investments, marketing, or other business functions.
An insurance company, therefore, has an incentive to keep reserves low.
Setting accurate reserves for all reported claims is critical to maintaining an insurance company’s financial stability and avoiding inquiries from the state insurance commissioner.
An insurance company’s failure to reserve enough money can bankrupt the insurer if the income from premiums cannot cover current claim losses.
This risk is why federal and state laws (including regulations passed by state insurance commissioners) require insurers to maintain adequate claim reserves.
The insurer’s claims department is responsible for setting reserves.
Usually the insurance adjuster (or their supervisor) sets the claim reserve within hours of receiving notice of the claim using one of the following reserving methods:
When the insurer uses the individual case method to set reserves in a workers comp or bodily injury claim, the adjuster estimates the claim expenses using statistical data compiled by the company’s actuarial department, personal experience with other claims, and by considering the lines of coverage and factors below:
Yes, the insurer should set a reserve even though it may deny coverage for the loss.
For example, the insurance carrier may incur investigation and litigation expenses (attorney fees, expert witness review, etc.) even if a judge or jury denies the claim at trial. The reserves should account for these potential costs.
Yes.
There will be a delay between the event giving rise to the claim (auto accident, work injury, property damage, slip and fall, etc.) and the claim’s settlement. Indeed, this delay may range from a few weeks to several years, depending on the dispute and whether the parties litigate the claim or appeal lower court judgments.
During this period, the insurer may lower or raise the claim reserve amount as it receives additional information on wage loss and medical treatment. Indeed, many insurers review claims files periodically (every 60 to 180 days) to decide whether to adjust reserves.
In addition, the insurer may adjust the reserve as it makes payments. For example, the claim reserve for a workers compensation case may change as the insurer pays indemnity benefits (temporary total disability, temporary partial disability, permanent partial disability) and medical benefits for doctor appointments, surgeries (such as spinal fusion), and physical therapy.
As the plaintiff in a personal injury case or the injured employee in a workers comp case, you want the insurance company to set a higher reserve because it will likely lead to a better settlement – sooner.
Insurers often stick to their reserve amount when it comes time to negotiate a compromise and release. Indeed, the claims adjuster’s settlement authority is usually limited to the claim reserve amount.
So, the higher the reserve, the more likely the insurer will offer a car accident or workers compensation settlement that you will accept.
Although it is possible to get the adjuster to revise reserves significantly, it may take time and cause a delay in resolving the claim. For example, the adjuster will have to explain to their boss (and maybe their boss’s boss) why they suddenly need a significant increase in the reserve.
You can influence the claims adjuster’s decision and scare them into setting a higher reserve (or revising the amount) by giving the adjuster the information needed to settle the claim as soon as you receive it.
Update the claims adjuster whenever you get new information. Do not wait until the statute of limitations approaches or you reach maximum medical improvement (MMI); many insurance companies try to set “final” reserves within six to nine months of the accident date.
In addition, everything you give to the insurance company pre-suit should focus on showing the worst-case scenario for the insurer.
For example, the following items may influence the claim reserve so that you receive a reasonable settlement:
Send all favorable evidence, whether admissible at trial or not.
Although it seems counterintuitive, making the insurance adjuster’s life easier can put more money in your pocket after a motor vehicle accident or work injury.
Keep the adjuster updated with evidence showing your injury’s severity and how it affects your ability to work and enjoy your life. Being proactive can increase the claim reserve, often leading to a higher settlement offer.
Contact us today if you have questions about negotiating a top-dollar workers comp or auto accident settlement.
Let’s start on the path to resolving your personal injury case for a reasonable amount.