Why Do Insurance Companies Lowball?

Dealing with insurance claims can be a complex and often frustrating process. One common complaint is the practice of “lowballing” by insurance companies. Lowballing refers to the strategy of offering settlements considerably lower than a claim’s actual value. Understanding why insurance companies engage in this practice can empower claimants to navigate the claims process more effectively and seek legal advice when necessary.

Profit Margins and Financial Motivations

At its core, insurance is a business driven by profit. Insurance companies aim to maximize their financial gains while minimizing payouts. Offering lower settlements allows them to maintain higher profit margins and bolster their bottom line.

Minimizing Precedent

Insurance companies are wary of setting precedents that could establish higher payout standards. By consistently offering lower settlements, they aim to avoid creating expectations that could lead to increased claims payouts across the board.

Negotiation Tactics

Lowballing is often a strategic move in the negotiation process. Insurers may start with a low offer, expecting that claimants will negotiate for a higher settlement. This allows them to find a middle ground that is still below the claim’s actual value.

Lack of Awareness

Claimants who are not well-informed about the full extent of their rights and the value of their claims may be more susceptible to accepting lowball offers. Insurance companies tend to capitalize on this lack of awareness.

Pressure for Quick Settlements

Insurance adjusters may push for quick settlements, especially when they know claimants are facing financial strain or immediate expenses. This urgency can lead individuals to accept lower offers without fully evaluating the long-term impact on their financial recovery.

Ambiguity in Policy Language

The language used in insurance policies can sometimes be ambiguous or open to interpretation. Insurers may exploit this ambiguity to justify offering lower settlements than what claimants believe they are entitled to under the policy terms.

No Potential Legal Costs

Insurance companies weigh the potential costs of defending against legal challenges. If a claimant doesn’t have an attorney and they determine that a claimant is not likely to pursue legal action, they may maintain their lowball settlement strategy since there is no risk of legal fees.

What To Do if You Receive a Lowball Settlement Offer

Receiving a lowball settlement offer can be disheartening, but it’s important to remember that you have options and can take steps to address the situation.

Stay Calm and Assess the Offer

Take a moment to assess the offer objectively. Understand the details of what is being proposed, including the amount, terms, and any conditions attached.

Understand the Full Value of Your Claim

Evaluate the full extent of your damages, including medical expenses, lost wages, property damage, and any other relevant costs. Compare the offered amount to your calculated estimate of the total value of your claim.

Gather Supporting Documentation

Compile all necessary documentation supporting your claim. This may include medical records, bills, receipts, photos, witness statements, and any other evidence that substantiates the extent of your losses.

Seek Legal Advice

Consult a trusted Philadelphia personal injury lawyer. They can provide valuable insights into the fairness of the offer, help you understand your rights and the value of your claim. 

Negotiate

Engage in negotiations with the insurance company. Your attorney can handle these discussions on your behalf, presenting a strong case for a higher settlement amount based on the evidence and the merits of your claim.

Litigation

If all attempts at negotiation fail, discuss filing a lawsuit with your lawyer. Your attorney can guide you through the legal process and effectively argue your case before a judge or jury.