Many insurers manipulate computer systems to underpay claims
June 8, 2012 1 Comment
A June 4, 2012 report published by the Consumer Federation of America (CFA) has found that computerized claims systems often used by insurance companies can be easily adjusted to make broad-scale “lowball” claims payments to injured consumers.
The report, “Low Ball: An Insider’s Look at How Insurers Can Manipulate Computerized Systems to Broadly Underpay Injury Claims”, details the history of the use of Colossus and similar software. The report identifies specific techniques that insurers use to produce “lowball” claims:
- Directly reduce payments by a predetermined amount across-the-board.
- Remove higher-cost claims from data used to determine the acceptable range of payments for particular injuries.
- Require insurance adjusters to second-guess medical professionals.
- Encourage adjusters to downplay or even ignore the likelihood that injured consumers will need future medical treatment or will be permanently impaired.
- Encourage adjusters to determine that drivers are partly at-fault for the auto accident that injured the claimant even if they were not at fault.
The report also includes excerpts from a recent class action lawsuit, Hensley v. Computer Sciences Corporation, including:
- Insurers could adjust Colossus to produce virtually any claims’ payment reduction they wanted, whether or not it was justified. One CSC executive told the court that Colossus could be “tuned” to potentially achieve a particular level of savings, such as 15 percent, for all claims.
- CSC claimed insurers could produce huge reductions in claims’ payouts, which insurers achieved in many cases. A CSC executive told the court that Colossus achieved savings of around 19 percent on overall claims payouts for some its insurer clients. Meanwhile, CSC’s competitors, like the Insurance Services Office (ISO) claimed that they could maintain even higher savings over time.
- CSC misled regulators about the purpose of Colossus, claiming that main function of the product was to achieve consistent payouts rather than enormous claims’ “savings,” which might be illegitimate.
Despite the report, I really don’t have a problem with Colossus in third-party claims. Litigation is an adversarial process. No one is forcing claimants to accept offers. An injured person is free to either take a settlement offered by the insurance company or take his/her chances with a jury.
I have previously spoken about Colossus in legal seminars and other places. My advice after this report remains the same.
Dont worry about what Colossus does or doesn’t do. The value of a case is determined by what your client is willing to accept. If my client will not accept a penny less that $X amount for her injuries, the fact that Colossus is only willing to pay 40% of that is of no consequence. Quit whining, prepare for trial and let a jury determine the value.