Writing a State Farm Demand Letter

How do you write a demand letter for State Farm auto claims?

Each major auto insurance company uses a combination of insurance claim software programs to evaluate the economic and noneconomic damages in an auto accident case to arrive at the settlement offer.  This article summarizes a few insights on writing demand letters for State Farm auto injury claims.

State Farm claim handling methods

State Farm has been the leading auto insurer in the United States for decades - a position now threatened by GEICO and Progressive. 

While Allstate's claim handling methods have been highly influential on the rest of the insurance industry, State Farm lead the claim handling changes in the early 1990s prior to Allstate's CCPR.  

In the early-1990s, State Farm hired the world's leading consulting company, McKinsey & Co., to overhaul its claim handling methods.  Similar to McKinsey's recommended changes at Allstate, State Farm breaks auto bodily injury claims into five primary categories that each have their own adjusters and methods of claim handling.

1. First call settlements (for small amounts of money within the first 72 hours of a claim);
2. Minor Impact Soft Tissue (or "MIST") claims;
3. Special Investigation Unit (or SIU") - the fraud unit of the company;
4. Clear Policy Limits cases; and
5. General Claim Handling 

While Allstate's MIST program is well known in the insurance industry, State Farm had started contesting "minor impact" claims several years earlier.  Maximum payments of $2,500 for bodily injury settlement offers were implemented for minor impact claims regardless of injury severity. (For ways to get claims out of the "minor impact" claim unit see our "minor impact claim handling" letters to increase settlement offers in low vehicle damage cases, which is part of the Settlement Intelligence platform license.)

State Farm and TEACH

State Farm was the major insurer which held off on implementing bodily injury claim evaluation software for the longest.  Instead State Farm and McKinsey created a system of evaluating claims called TEACH (Total Evaluation and Claim Handling), which the company launched in September 1994 and rolled out to claims adjusters throughout the country over the next two years.  TEACH still guides some of State Farm's claim decisions.

According to an affidavit by former State Farm claim supervisor Stephen Strzelec:

TEACH focuses on all major aspects of injury-claim handling, including investigation of coverage; evaluation of the claim; negotiation; the use of alternative dispute resolution (settlement outside the court system); and effective handling of lawsuits.

As legal demand letter consultants for the past 20 years, we know about TEACH and have advised law firms on how to maximize settlement offers with State Farm for decades. Unlike other Legal AI companies, Settlement Intelligence's founders are not new to insurance claim practices and that makes a huge difference in what we offer lawyers in terms of expertise and quality.

Was TEACH like Colossus?

No. Contrary to many law firm web sites, TEACH was not like Colossus, the AI insurance claim program implemented by approximately 60% of auto insurance companies. TEACH is not a computer system that generates claim values like Colossus.  It is a method of claim handling developed by State Farm and was only used at State Farm.  

State Farm did not use a computer software bodily injury claim software system to generate settlement offer values until much later.

State Farm's Implementation of Claim Software

It wasn't until approximately 2020 that State Farm implemented claim software to set the noneconomic damage settlement offers of bodily injury claims.  But, it now uses one of the best known systems.  Settlement Intelligence knows the factors used in generating the settlement offers in State Farm claims through our extensive 20+ years of research into insurance claim software. 

Settlement Intelligence allows law firms to write demand letters that report all of the factors of value in State Farm claims software.  The client's claim data is organized in a way that allows State Farm's adjusters to enter the information directly into their claim software and generate higher settlement offers from the software.  

Reasonable and Necessary Medical Bills

The phrase "reasonable and necessary" is common in considering whether the client's past medical bills are necessary for the injuries caused by the car crash, and reasonable in the amount of the health care procedure or treatment charge (CPT code) given the customary charges in that geographical region.

State Farm uses economic damage claim software to evaluate economic damage claims. A primary function of that software correlates ICD codes (injury diagnosis codes) and CPT treatment codes.  A primary problem in personal injury claims is the failure of hospitals, clinics and doctors of fully diagnosing a patient.  If an ICD diagnostic code doesn't exist in the record for an injury, all treatment on that area or injury may be provided zero value in the economic damages.  (In our prior role as legal consultants, we've seen many cases of very low settlement offers because a client wasn't fully diagnosed. Settlement Intelligence's upcoming full AI products will demonstrate when this is an issue.) 

A failure to have ICD codes for all of the CPT treatment codes, is how some client's cases result in settlement offers that are lower than the client's medical bills.  Just as detailed medical records are critical to achieving the best evaluation of noneconomic damages, a complete diagnosis of the client by their providers is critical to obtaining a full economic damage evaluation. We discuss this in more detail in this blog post on increasing settlement offers by finding all of the diagnoses for the demand letter.

Some services on the same date will not be provided value.  At Settlement Intelligence, we know which ones those are and our AI Medical Timelines can alert you to this problem.

Economic Damage assessment software also considers the amount of reasonable charges for medical services within a geographical area.  The system provides caps on certain types of treatment.  

Demand Letters Optimized for State Farm

Settlement Intelligence was built around the method used by the founders for the past 20+ years. Unlike other companies claiming AI demand letters, our founders are not new to personal injury law.  We are the leaders in optimizing demand letters for insurance company claims software systems.

If you want to increase your offers from State Farm and settle a higher percentage of your firm's State Farm claims, license Settlement Intelligence today.

See one of our customer reviews who has experienced significant success with State Farm claims since implementing Settlement Intelligence.