but when people actually need that service that they've been paying for, do they want to play fair?

I can understand their point of view -- remember that the prime directive of an insurance company is not to provide protection for their clients, but to provide profits for their shareholders.

I see nothing wrong with this.

I do object to obvious malfeasance, as in this case, offering half the actual value of the car in question and hoping that the owner will just meekly accept it.

About 10 years ago I had a similar experience. Somebody pulled out in front of my wife on a 60 MPH road. He wasn't careless or reckless, he just made a mistake: the stretch of road he was crossing was quite icy, and he couldn't accelerate as quickly as he thought he could, nor could my wife slow down as quickly as might be expected. I would guess the speed at impact to be in the area of 40 MPH. Surprisingly, there were no injuries of any sort for any of the parties involved.

The guy's insurance company started playing the same low-ball tricks as I am seeing today with my cow-orker's accident. They changed their tune and no questions asked gave me $500 more than I had paid for the car two months earlier (they had offered $2600, I had paid $4100 for the car, they gave me $4600) when I pointed out to them how incredibly fortunate they were to be on the receiving end of a claim for an accident that involved a 40+ MPH T-bone collision and no personal injury claims were being filed!

That caught somebody's attention, and they became instantly co-operative.

Perhaps a similar strategy could be employed in this present case...

tanstaafl.