By Dustin Fox, DFox Law

I’ve spent the last ten years negotiating with insurance companies on behalf of injured clients. It’s a strange dance, really; one where both parties know that unless the insurance carrier is offering the full policy limits, there’s virtually no chance we’re accepting their first offer.

So why do they even make an offer that low in the first place?

The answer lies in a negotiation tactic known as anchoring – a cognitive bias where the first piece of information presented becomes the reference point for all future discussions. In the insurance world, that “anchor” is the first settlement offer. And it’s almost always insultingly low.

The Psychology Behind Anchoring

Anchoring is a well-documented psychological phenomenon. In their groundbreaking 1974 study, Daniel Kahneman and Amos Tversky showed that people tend to rely heavily on the first number they hear, even if it’s random or arbitrary[^1]. This is exactly what insurance adjusters count on.

Let’s say your claim is worth $50,000, and the first offer is $6,500. That’s not just a starting point, that’s a strategic psychological ploy. The insurance company is hoping that by offering something, they appear cooperative, while simultaneously shifting the negotiation scale in their favor. They’ll nudge it up a few thousand dollars at a time, framing each increase as a favor—when in reality, you’re still miles from fair compensation.

Why Their First Offer Is Just a Test

Make no mistake: the insurance company’s first offer isn’t serious. It’s a probe—a test to see what kind of opposition they’re up against. In my experience, I’ve more than doubled first offers more times than I can count. That’s not luck, it’s understanding how to apply pressure in the right places.

Insurance companies are sophisticated entities that assess risk. They don’t care about fairness, they care about exposure. When I step into negotiations, I bring leverage they don’t have with a regular citizen. I know their rules. I know the law. And more importantly, they know I’m not afraid to file suit.

That’s a very real difference in risk from their perspective. If a layperson tries to negotiate, there’s no real consequence for the insurance company if they delay, deny, or underpay. But when a personal injury attorney with trial experience gets involved, the stakes change. Suddenly, their internal risk calculators start flashing red.

What Science Says About Negotiation Tactics

Anchoring isn’t the only tactic at play. According to Harvard Law School’s Program on Negotiation, one of the most powerful tools in any negotiation is understanding your BATNA – Best Alternative to a Negotiated Agreement[^2]. The stronger your BATNA, the more leverage you have. For most people, hiring an experienced attorney is their BATNA. The moment I’m involved, the insurance company realizes they’re no longer negotiating in a vacuum.

Further, a study in the Journal of Personality and Social Psychology found that even arbitrary anchors significantly influence decisions. That means even a laughably low offer has a psychological impact on the average person[^3]. I don’t let that pull dictate the outcome, I recognize it for what it is: a strategy, not a value.

What You Should Do Instead

If you receive a quick settlement offer, especially within days of your injury, don’t cash the check. Doing so may legally count as accepting the offer, which could destroy your right to fair compensation.

Instead, consult with an experienced personal injury attorney who understands how to navigate this game. Not every claim is worth six figures, but every client deserves to be treated fairly, and every negotiation should be handled by someone who can counter the insurance company’s tactics with equal force.

Final Thought

At DFox Law, we don’t just “handle” claims; we fight smart. Negotiation is both art and science. And if you start the conversation by playing their game, you’ve already lost. That’s why the first offer is always the wrong offer.

Let me help you anchor the conversation where it belongs: in reality.

References

[^1]: Tversky, A., & Kahneman, D. (1974). Judgment under Uncertainty: Heuristics and Biases. Science, 185(4157), 1124–1131. Read it here

[^2]: Program on Negotiation, Harvard Law School. (n.d.). BATNA: What’s Your Best Alternative to a Negotiated Agreement? View resource

[^3]: Galinsky, A. D., & Mussweiler, T. (2001). First offers as anchors: The role of perspective-taking and negotiator focus. Journal of Personality and Social Psychology, 81(4), 657–669. View study