How Insurers View Medical Bills & Pre-Suit Offers
Insurers control the purse strings. They choose which claims they are going to settle.
Yet, I often see insurers complaining about certain practices in the personal injury industry that the insurers’ own practices have incentivized.
Why do law firms do some of those things? It’s because they get results in that insurers frequently pay the claims. The law firms wouldn’t do what they do if their practices didn’t result in the law firms making money.
Insurers frequently pay policy limits of $100K or less on cases based solely on the medical bills.
Here’s an example:
Say there is a car wreck with two people in the same vehicle. Policy limits for the at-fault driver are $50K. The two clients have the same exact treatment: ER, orthopedic visits, 1 epidural steroid injection, and 6 months of physical therapy.
The only difference is the amount of medical bills:
- Client 1’s medical bills are $25K.
- Client 2’s medical bills are $40K.
I can almost guarantee you that if it is one of the large insurers, Client 2 will get the $50K policy limits paid on his claim.
Client 1? They’ll get a pre-suit offer less than the medical bills (probably in the range of $15K). Client 1 will then have to file a lawsuit and potentially litigate the case for many months or years, and may have to go to trial.
I see this happen all the time. It isn’t an aberration. And it makes zero sense.
Why the discrepancy? Because insurers focus almost single-mindedly on the medical bills, at least when it comes to pre-suit motor vehicle claims. They give little, if any, weight to actual pain and suffering. It’s like it doesn’t exist.
And why is that? Because insurers want it so a formula or algorithm can handle their claims. They want to process as many claims as possible, as cheaply as they can. They are incapable of evaluating each claim individually. As a result, they use one factor as the biggest proxy for claim severity: medical bills.
What message does this send to personal injury lawyers? Particularly those whose business model is to run a high volume and settle as many cases as they can, as easily as they can?
If insurers don’t like what they see, perhaps they should look internally at what their own practices have incentivized. Then maybe they should try to realign the incentives, instead of constantly looking for external, legislative fixes that (a) won’t solve the problems, and (b) will likely just cause new problems to pop up.
What do you think? Join the conversation with me on LinkedIn.