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Insurers Manipulate Computer Systems to Underpay Injury Claims

A recent report has been published by the Consumer Federation of America (CFA) which states that computerized claims’ systems (such as colossus) used by many of the nation’s major insurance carriers can be conveniently adjusted to make insufficient, “lowball” claims’ payouts to injured consumers that are actually less than what those victims should receive under their insurance premiums. Surprisingly, the main author of the report is an expert on insurance claims’ practices and was a respectable insurance executive.

“This report is a wake-up call for consumers and regulators who are not aware of the many ways that computer claims’ software can be manipulated to produce unjustifiably low injury payments to consumers and tens of millions of dollars in illegitimate ‘savings’ for insurers,” shared Mark Romano, CFA’s Claims Project Director. Romano was noted as the “subject matter expert” on the Colossus injury claims’ assessment system at Allstate and Encompass insurance for ten years. Colossus is currently the leading claims’ system in the marketplace, and is sold and distributed by Computer SciencesCorporation (CSC). Colossus routinely undervalues soft tissue claims and forms blanket settlement opinions off of property damage.

“When CSC and its competitors speak openly about computer-based claims’ systems, they place emphasis on the fact that the programs permit insurance companies to more consistently evaluate bodily injury claims,” says Romano. “Consistency is an appropriate goal; however, these companies share a different story behind closed doors. Software marketing representatives recognize that the actual reason insurance companies are willing to spend millions on these systems is that they can reduce claims’ payments to thousands of consumers at a single time, regardless of whether or not these settlements are fair.”

The report titled, “Low Ball: An Insider’s Look at How Insurers Can Manipulate Computerized Systems to Broadly Underpay Injury Claims,” explains the history of the use of Colossus and similar software programs used by insurance companies. The report reveals extensive information about how these programs are created and altered to attain claims’ payment monetary goals. The report also suggests sly techniques that insurers can use to directly and indirectly warrant unfair claims:

  • Directly cut payments by a predetermined amount for every insurance holder, without determining if this will lead to unjustifiably low payments for certain individual claims
  • Selectively eliminate higher-cost claims from the data set used to decide the acceptable range of payments for particular injuries. Generally, this has the outcome of lowering payments for all claims of this type
  • Employ insurance adjusters who possess no medical training or proper credentials to second-guess a medical professional by modifying the declared injuries, consequently allowing lower payouts for certain injuries
  • Encourage insurance adjusters to minimize or even disregard the likelihood that the injured consumer willneed future medical care or will be permanently impaired, thus reducing thepayout amount
  • Encourage the insurance adjusters to determine that drivers are at least partly at-fault for the accident that injured them, even when they may not be

“Many of the concerns about Colossus and similar programs have focused on the potential for insurers to manipulate these systems directly in order to reduce claims’ payouts,” says Romano. “But insurers also use numerous methods to unfairly lower pay outs in a more understated manner, by inputting biased or incomplete information into the system.”

The report includes extracts from newly released court documents from a major class action lawsuit that has been filed, Hensley v. Computer Sciences Corporation, which reveals disturbing information about how Colossus and related systems are marketed to and used by major insurance companies:

  • Insurers are able to manipulate Colossus to allow for any claims’ payment reduction amount they wanted.  A CSC executive explained the court that Colossus could be “tuned” to achieve a specific level of savings for all claims filed.
  • CSC stated that insurance companies could produce huge reductions in claims’ payouts, which insurers accomplished in numerous cases. A CSC executive voiced to the court that Colossus achieved a savings of about 19% on claims payouts for a portion of its insurer clients. A CSC’s competitor, Insurance Services Office (ISO), alleges that they could produce even higher savings for pay outs.
  • CSC misinformed officials about the true purpose of Colossus, suggesting that the main function of the product was to achieve consistent payouts rather than massive claims’“savings,” which may in fact be illegal.

“These documents illustrate that most of the nation’s major insurance companies used the Colossus system in ways that put millions of American consumers at risk of not receiving the claims payments that they paid for with their premiums,” says J. Robert Hunter, CFA’s Director of Insurance and former Federal Insurance Administrator and Texas Insurance Commissioner. “The documents also reveal, unfortunately, that top executives at these companies violated their obligation to deliver fair claims’ payments to their own policyholders on a huge scale, in order to increase profits.”

The report shares recommendations for regulators to better protect consumers from those insurers that manipulate Colossus and similar systems to unfairly minimize claims’ payouts:

  1. Regulate every company that sells claims’ adjustment software products, such as CSC.  Currently, neither the states nor the National Association of Insurance Commissioners (NAIC) does this for all distributors of these misleading products.
  2. Analyze and monitor the use of computerized claims’ evaluation systems by popular insurance companies. The NAIC should thoroughly investigate the techniques that all insurance companies use to directly andindirectly minimize claims’ payouts in an unjust manner. (The NAIC and state-based regulators signed an agreement with Allstate in 2010, which required the company to make a few minor changes in how it utilized Colossus.)
  3. Require insurers to notify consumers, in writing, that a computerized claims’ assessment was used to evaluate their claim and to provide a copy of the report produced by the system. This will allow consumers to determine if they received a fair payout, or if they need to appeal the claim.

“The NAIC investigation of computer adjustment systems was incomplete and flawed,” says Hunter. They only investigated how one company, Allstate, used Colossus. And their agreement with Allstate did very little to change how Allstate uses Colossus to evaluate claims’ payments or to protect the insured from potential abuses.

The injury law attorneys at Sibley Dolman Gipe Accident Injury Lawyers, PA are very familiar with computerized claims systems and the criteria utilized by such systems in determining the value of a given claim. This enables us to set cases up properly and determine if and when an insurance carrier has deviated from the standard of good faith and fair dealings in their evaluation of a claim. For more information, call the injury law attorneys of Sibley Dolman Gipe Accident Injury Lawyers, PA at: (727) 451-6900 for a free consultation and case evaluation.