Americans don’t really have much of an opportunity to negotiate anymore. When I was a kid, it was still possible to dicker over the price of many items, but good luck today trying to bargain down the price of a TV at your local electronics chain. It’s still possible to negotiate the price of a house or car, but these aren’t exactly daily purchases; the typical American is simply inexperienced in the fine art of bargaining. Negotiation is, for most people, venturing into unknown territory and a logical source of fear and anxiety.
It’s even worse when you have to negotiate with a professional; insurance claims adjusters are, among other things, professional negotiators. Depending on the types of claims they handle, they may negotiate anywhere from one or two claims a week to several a day. This can make negotiating an insurance claim quite intimidating, as adjusters clearly have the advantage of experience. However, there are things you can do to level out the playing field a bit. While some people are more natural negotiators than others, negotiation is a skill that can be learned. And as with most things, the more you understand about the process the better.
The Attorney Factor
The fear of dealing with an insurance company drives many people to hire attorneys. Depending on the type of claim you have, this might be a wise decision, but it shouldn’t necessarily be your first option. Attorneys can be helpful, but they are expensive, usually charging 25-30% of your gross settlement (stop a moment and do some math.) Also, attorneys are not always great negotiators. Some attorneys operate on what I call the Wal-Mart principle: low profit, high volume. They don’t count on getting the “top dollar” for all of their cases, as they make their profit on settling as many cases as they can. However, there are also very good, ethical attorneys who handle every case like it was their only one. If you’re planning on hiring an attorney, interview more than one, and among other things, find out how many cases they personally handle.
Now I’ll tell you a little secret: While many people assume that insurance companies are intimidated by attorneys and therefore pay larger settlements if an attorney does the negotiating, the truth is that most insurance adjusters prefer dealing with attorneys than with unrepresented claimants (what I used to call “real people”). This is because attorneys understand the process, they have a better idea about the dollar value of a claim, and they are more objective. Even more importantly, it usually turns out to be less work for the adjusters in the long run. (Another little secret: “Less work” is a key factor for insurance adjusters, who are typically over-worked. More on this later.)
Unless you are having some specific difficulties negotiating your claim, it usually doesn’t pay to hire an attorney for property damage claims, such as an auto total loss, or a home fire loss. The reason for this is because insurance companies will not pay you enough to cover the additional cost of your attorney. In most if not all jurisdictions, you can’t get general damages (i.e. “pain and suffering”) for a property loss. So, if it costs $75,000 to repair your home, that’s typically all you can expect to get in settlement, with nothing left over to pay your attorney (or, leaving you 30% short of what you need to repair your home). It’s up to you to research what types of damages are available to you in your jurisdiction, and to decide whether hiring an attorney is cost-effective.
In Part 2 of this article, I will focus on negotiating personal injury claims, providing insights into the issues driving insurance companies and adjusters, which will help you better understand the negotiation process. I will also give you some tips to make handling your insurance claim smoother. My theory of conflict resolution and settling claims – how I approached things for twenty-two years – is that the insurance adjuster has the same goal you do: to resolve your claim in a fair and equitable manner. By being wise, you can help the adjuster reach his goal, and reach yours at the same time.
I totally agree