An 18-month investigation into Allstate’s handling of injury claims from automobile accidents resulted in a settlement, which designated $10 million specifically for educating insurance regulators on the proper use claims software. The National Association of Insurance Commissioners (NAIC), along with the Illinois, New York, Florida and Iowa insurance departments, examined the use of claims software by Allstate and how it affected the claims handling process in several different states.
The NAIC study found “inconsistencies in Allstate’s management and oversight” of the claims software. Specifically, it discovered that Allstate “failed to modify or ‘tune’ the software in a uniform and consistent manner across its claims handling regions,” according to James Wrynn, the New York State Insurance Superintendent. Wrynn also noted that the study did not find that Allstate was involved in “systemic underpayment of bodily injury claims.”
The Colossus Claims Handling Software
Allstate uses a claims handling software called Colossus to determine settlement offers for bodily-injury claims resulting from automobile accidents. Because claims adjusters have varied backgrounds, experience and knowledge, the value of similar claims is often inconsistent from one adjuster to another adjuster. The Colossus program is intended standardize the claims process by providing consistent valuation of claims for settlement offers. Allstate claims that using Colossus “provides significant benefits to the public in increased objectivity and efficiency.”
When an Allstate insured is injured in an accident, adjusters enter relevant medical information into the Colossus program, which then analyzes the claim, assigning “trauma severity points” to the injuries suffered. Once assigned, Colossus calculates a value range for the damages based on a pre-assigned dollar amount to each severity point. Also, Colossus compares the current claim to other claims stored in its database, including recent settlements and judge/jury awards for similar claims.
The Shortfalls of Colossus that Harm Insureds
One of the complaints of the Consumer Federation of America is that Colossus fails to take into account certain factors that could greatly affect the value of a claim, award or settlement offer when calculating its estimated settlement value range. This could include past and future medical bills, lost wages or even job loss.
A computer program, while able to compute complex formulas, is unable to account for the human condition (pain and suffering) of an injured person. Colossus can only average out past jury awards involving other injured persons or compute the data that is entered; it cannot consider the practical effect of an injury on a family.
Colossus also provides Allstate with an easy fallback position when negotiating by allowing its adjusters to claim that their offer is what the system calculated; therefore, it is what should be paid. This position can be used to stubbornly lowball an injured claimant.
The Terms of the Settlement
As part of the settlement, Allstate agreed to change its claims handling process to help ensure that claims are handled consistently throughout the country. According to a press release issued by the New York State Insurance Department, “Allstate agreed to make a number of changes to its claims handling process, including:
- Providing notice to claimants that the Colossus software program may be used in the adjustment of their bodily injury claims;
- Enhancing its management oversight of Colossus to ensure that it adheres to established criteria and a uniform methodology in selecting claims to be used to “tune” or modify the software to reflect recently settled claims;
- Strengthening its internal auditing of Colossus and bodily injury claims handling to ensure adherence to written guidelines and procedures;
- Consolidating its bodily injury claims handling practices into a single claims handling manual; and
- Not establishing a policy or rule requiring claims adjusters to settle bodily injury claims solely on the value recommended by Colossus and not providing incentives for claims adjusters to settle claims at or near the value recommended by Colossus.”
While the study did not find that Allstate engaged in “systemic underpayment” of claims, it seems as though Colossus allows Allstate a simple way to undervalue specific claims.
The Educational Fund for Insurance Professionals
Allstate also agreed to pay $10 million to the 45 states that participated in the settlement to establish an educational fund for further training of state examiners in the use of claims-adjustment software. The training should help adjusters better spot the improper use of claims software.
Dealing With Colossus and/or an Insurance Adjuster in the Future
The settlement should help injured persons negotiating with Allstate better understand how Allstate arrives at a claim offer. The settlement should also help those who live in regions that had traditionally low settlement offers as compared to other regions that typically receive better, arguably fairer, higher offers.
If you have been injured in a car accident and need to pursue recovery from an insurance company, don’t go the path alone. Speak with an experienced personal injury attorney who can help you fight for the compensation you need for your injuries.