“Pre-med offers” – risk versus reward

In recent years, there has been a noticeable increase in insurers making personal injury clients very early offers to settle their cases. These offers are usually made before any medical evidence has been obtained on the injuries. So why do insurers do this?

Such an offer is known as a “pre-med offer” (pre-medical report) and this is very much a tactical move from insurers which is being implemented more and more on larger value claims. The actual settlement value of any claim can only be determined once medical evidence has been obtained on every aspect of a client’s injuries. In larger value claims involving serious injuries, one would usually require multiple reports from each expert and only once finalised evidence has been obtained from every expert instructed in the claim with a final opinion and prognosis can medical evidence be considered complete and only then is it possible to begin to work out the true settlement value of the claim.

Getting to this point of the claim, especially in respect of claims involving very serious injuries, is a lengthy and costly process. Insurers know this and are therefore keen to effectively “buy off” the claim at a very early stage. In doing so, they hope to save a lot more money in the long run, as they will not only have to pay the client’s damages, but they will also have to pay his or her legal costs, which after several years could be substantial.

There are very much two sides to the coin here and a pre-med offer gives a client a very difficult decision to make. Whilst nobody can even begin to definitively determine the realistic value of a claim without a shred of medical evidence on any of the injuries suffered, our experience of handling such claims on a daily basis and over a period of many years means that we can at least get some idea early on in the claim of the sort of range of awards that the claim might possibly fall into, albeit that that range may be incredibly broad.

Insurers will often undertake such an exercise of applying a very broad valuation to every claim from the outset, as they have to set a reserve for the claim in any event. Very often, once the reserve has been set, they will then make a pre-med offer which, on the face of the very limited information available at the time, appears to be potentially a generous. They do this in the hope that the client will see a large sum of money being offered to them, not only leaving them with a large lump sum in their pocket but also negating the need to engage in a lengthy litigation process for the next x number of years and that they accept the offer and bring the claim to an end very early on and before any further costs which would ultimately be payable by the insurers arise.

For example, one of the main benefits of making a personal injury claim is that, as part of the claims process, we can arrange for you to have private treatment to aid your recovery from your injuries, which in many cases the insurers have to pay for. If you need to have physiotherapy, x-rays, CBT or any other form of treatment or investigations, this can all be arranged via the claim and paid for by the insurers. As you can imagine, these costs soon add up but if a client accepts an early pre-med offer, they lose the opportunity to have all treatment and investigations carried out privately and funded by the insurers and are then left with the only option of paying for this themselves from their damages if they are minded to continue with private treatment.

Furthermore, any medical report fees charged by experts from whom we get medical evidence on your claim are also paid by the insurers and there are countless other fees and charges payable by them throughout the claim (known as disbursements). They know this and are keen to avoid these charges, so look to try and do so by trying to tempt the client to settle their claim as early as possible.

Clearly, a significant, stress-free and early lump sum payment is a very attractive proposition. I have regularly had 6 figure offers made on claims in which it is far too soon to have any realistic idea of the overall value of the claim, but when faced with such a large sum of money being put on the table early on in the claim process, many clients, understandably, are keen to accept the offer.

However, what we have to stress to our clients at this point is that any offer they accept has to be accepted in full and final settlement of their claim. This means that, if after setting the claim it transpires that there is a deterioration in their condition for example, which is directly linked to their accident and which in turn means that their claim was actually worth a lot more than they settled it for, they can never go back to the insurers to claim any more money. This would mean that they had under-settled their claim, with no remedy for this at all.

Perhaps one of the most extreme examples of this would be if a pre-med offer is accepted by a young client who, after settlement, later finds out that they will never be able to work again as a direct result of the injuries they sustained in their accident. A 21 year old, for example, would have 45 years or more ahead of them or working life and earning a salary but may have been tempted to accept an early, pre-med offer of, say, £500,000. This is, of course, a huge amount of money and it would be completely understandable why any client might want to accept such an offer, but if we break this down further, even if this client was only going to earn £25,000 a year for the rest of his or her life (which does not even account for any sort of career progression, promotions, bonuses and pay rises), over a period of 45 years, this alone would equate to a basic loss of earnings claim of well over £1,000,000.

Whilst this is a very “rough and ready” calculation and is only used by way of an example, you can see straight away that suddenly, the offer of £500,000 was not such a good offer after all. However, there is no way of knowing this when the offer is made, which is why clients are put into such a difficult position when this happens.

Whilst I understand why insurers are making pre-med offers more and more often, it is, in my opinion, an underhand tactic which puts clients at a huge disadvantage. They are being expected to make a crucial decision without all of the information they need to be able to best determine whether or not that decision is the correct one. The purpose of a personal injury claim is to put the injured party back into the position that they would have been in if the accident had never occurred, but how can this possibly be accurately determined without any medical evidence? Quite clearly, it can’t, but insurers are keen to “buy off” claims as early as possible to save themselves a potentially higher pay out further down the line, making it impossible for any lawyer to advise on the risk versus reward of accepting a pre-med offer.