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A former auto insurance claims executive says U.S. motorists are being shortchanged by "tens of millions of dollars" because the industry's leading computerized claims system can be easily manipulated to generate "lowball" claims payments to injured motorists.
The new report from the Consumer Federation of America, entitled "Low Ball: An Insider's Look at How Insurers Can Manipulate Computerized Systems to Broadly Underpay Injury Claims," features whistleblower revelations from lead author Mark Romano, CFA's Claims Project Director.
For nearly a decade, Romano served as "subject matter expert" at Allstate and Encompass insurance companies for the Colossus injury claims evaluation system, the industry's dominant claims software sold by Computer Sciences Corporation.
The report says that Colossus and similar software products can be "tuned" to meet the financial goals of the insurance companies by using the following techniques:
- Directly reduce payments by a predetermined amount across-the-board, without determining whether this will lead to unjustifiably low payments for individual claims;
- Selectively remove higher-cost claims from data used to determine the acceptable range of payments for particular injuries, thus lowering payments for all claims of this type;
- Require insurance adjusters without medical training or credentials to second-guess medical professionals by altering injury determinations, thus dictating lower payments for certain injuries;
- Encourage adjusters to downplay or even ignore the likelihood that injured consumers will need future medical treatment or will be permanently impaired, thus lowering payouts; and
- Encourage adjusters to determine that drivers are partly at fault for the auto accident that injured them, even when they may not be.
The report also includes newly released court records from a class action lawsuit against Computer Sciences Corporation that claim the company misled regulators by stating that the main purpose of the software was to achieve consistent payouts rather than to save insurers millions in injury claim payments.
"These documents show that most of the nation's top insurers used the Colossus system in ways that put millions of American consumers at risk of not getting the claims payments that they paid for with their premiums," says CFA's Director of Insurance Bob Hunter, a 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 CFA study calls on the states and the National Federation of Insurance Commissioners to regulate and monitor all companies that sell claims adjustment software, and for insurance companies that use this software to notify and provide a report to motorists when their claim has been turned over to a machine.
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