Report: Insurance Claims Systems Adjusted To Lowball Payouts

A former insurance company executive has authored a report for the Consumer Federation of America detailing how easy it is for the country’s largest insurers to tweak their computerized claims system in order to issue payments to injured policyholders that are less than what they should receive.

Mark Romano, a former executive at Allstate and Encompass, and now the CFA’s Claims Project Director, is an expert on the Colossus injury claims system, one of the most widely used evaluation systems in the industry.

His report, titled “Low Ball: An Insider’s Look at How Insurers Can Manipulate Computerized Systems to Broadly Underpay Injury Claims,” provides details on how Colossus and other programs are “tuned” to reach particular claims payment monetary goals and adjusted over time.

Among the techniques intended to reach these bottom-dollar payments:

*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. This has the effect of 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.

*Encourage adjusters to determine that drivers are partly at-fault for the auto accident that injured them, even when they may not be.

“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,” says Romano.

He says that the public discussion of these systems is all about the very legitimate goal of consistency, “but these companies tell a different story behind closed doors. Software marketing representatives acknowledge that the real reason insurance companies are willing to invest millions in these systems is that they can dial down claims’ payments to thousands of consumers at a time, regardless of whether these payouts are fair.”

Check out the entire PDF of the report HERE.

Comments

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  1. Marlin says:

    “Insurance Claims Systems Adjusted To Lowball Payouts”

    Nooooooo… you don’t say.

  2. crispyduck13 says:

    I’m more surprised that there are multiple people out there who think insurance companies are fair and pay out claims appropriately.

  3. TuxthePenguin says:

    I guess my first question is why the heck is this data coming out now? Why hasn’t this been caught by a regulator or during some audit? Its standard practice to test the systems…

  4. Loias supports harsher punishments against corporations says:

    Some of these aren’t manipulating computer systems, it’s out and out fraud and data falsification.

  5. Zowzers says:

    The single most important thing to realize with any insurance policy, You are not the customer. You are their source of income, their customer is their share holders. A claims adjuster job is to pay out the absolute minimum for any given claim.

    • Chmeeee says:

      No, the shareholders are the owners. The customer is the one that pays money, the owner is the one that makes money. We can’t just change these definitions.

      • MathMan aka Random Talker says:

        Thank you.

        /no sarcasim

      • who? says:

        Generally, your employer is the customer, not you. And you and your employer don’t value the same things in an insurance policy as you do.

  6. Vermont2US says:

    Duh.

  7. nopirates says:

    i find it hard to believe that insurance companies aren’t perennial winners in the worst company in the world tournament

  8. Buckus says:

    No more surprising than having teams of people poring over policies of the recently-deceased to find out if they can get out of insurance payouts via recission.

  9. CrazyEyed says:

    Looks like they made exceptions for some of those crazy ones above the fold and to make up for it, they had to screw others making claims who need it. This articles doesn’t suprise me though. What’s the point in getting insurance if your insurer is going to try and F*** you in the end.

  10. Important Business Man (Formerly Will Print T-shirts For Food) says:

    How I feel about this article:
    http://fuuu.us/275.png

  11. rawrali says:

    I guess I don’t get this. Whatever amount is paid out is what the claimant agrees to, by signing a settlement agreement. If the claimant believes that the amount offered by the insurance company is too low, then they can haggle. If that fails, they can retain an attorney and file suit. The companies are not just unilaterally issuing lowball payments that the claimants can’t do anything about.

    • CrazyEyed says:

      Because everyone has the time and the money to rettain an lawyer.

      • Vermont2US says:

        And many consumers would feel it’s a waste of time to try arguing with the big bad insurance company, figuring they’re gonna lose anyway.

      • aleck says:

        You don’t need time and money. Injury lawyers will come to your hospital to sign the paperwork. And most are paid by the percentage of the payouts.

        I generally do not support injury lawyers, but can see how they are needed to fight the system.

    • econobiker says:

      The companies are actually are issuing low ball payments that the claimants can not afford to do anything about. And by making all the payments roughly in the same range the lawyers/ injured folks will not see the trend.

  12. Pwillis says:

    Regarding “technique” 3 and 4…history of collusion(especially in WC) between doc lawyer and injuries party…it is responsible for insurance companies to ensure they are not over paying for unnecessary or misdiagnosed injuries. Most insurance companies have software system which points out inconsistencies in data per injury type. Those suspicions are then referred to a contract or hired medical professional to review. Arbitration is the next step. Point 4, adjusters have no say in PIR in WC. In regards to other lines, we have a court system in America for just such squabbles. Sounds like a disgruntled ex exec

  13. econobiker says:

    “*Require insurance adjusters without medical training or credentials to second-guess medical professionals by altering injury determinations, thus dictating lower payments for certain injuries.”

    Business as usual for the insurance industry- both injury liability and health…

  14. truthandjustice says:

    What ALL posters thus far FAIL TO recognize is the FORMER REALITY that insurance companies used to be MUTUALS — therefore, all of their insureds WERE the stockholders. This is the insidious harm of how big business re-invents or revisions what the norm and original intent WAS.

    Definition — mutual — denoting an insurance company or other corporate organization by its members (that used to be you and me) and dividing some or all of the profits between themselves.

    But the 99% — got screwed out of the deal — while the 1% changed the rules. As George Carlin said: “There’s a special club, and you and I ain’t in it.”

    But the 1% still have their rigged games. Remember, Lloyds of London is STILL a mutual, but the only members allowed are the incredibly wealthy.

    • Pwillis says:

      1.) You mean stakeholders not stockholders…and pretty much everyone these days is a stockholder in an insurance company. 2.) Nice 99% vs 1% class warfare attempt. 3.) My Church is insured by Lloyds, along with tons of property in the SE.

  15. Pwillis says:

    In regards to “techniques.”
    1.) Not sure about that. Seems like regulators would have picked up on this long ago.
    2.) Ever heard of an outlier? This is how statistics work.
    3.) There is significant data which points to fraud through collusion with Doctors, Lawyers, and injured party(especially in WC). If the software program indicates a discrepency based upon actuarial data of a particular injury the claim adjustor then refers the file to a medical professional(hired or contracted by the insurance company) to review and render an opinion. Arbitration is then implimented with a third outside medical professional if necessary.
    4.) This just isn’t true. In WC, the treating physician renders a PIR(Permanent Impairment Rating). That is independent from the insurance company. Regarding other lines of coverage, we still have a court system in America right? Yes? Ok, so if a company does this, there is a process established already. Oh and its worth noting, insurance companies love to be in the news over lawsuits (sarcasm stressed).
    5.) Hello Mr. Police Report.

  16. webweazel says:

    “Encourage adjusters to determine that drivers are partly at-fault for the auto accident that injured them, even when they may not be.”

    Like when a relative got in a small parking lot fender-bender when the other person was at fault. No big deal. The other insurance company tried to tell her that they wouldn’t pay because the accident was caused by “an act of god” because god had willed her to be in the car at that exact moment to be in that exact place in the way of the car that hit her. She was speechless, but only for a moment. She doesn’t take any bullshit from anyone and will tell you the exact reasons why you’re an idiot. She laid into this dude and she got a check two days later. Over-nighted.

    No, insurance companies do not pay, and will find any reason under their power including lying, coercion, and threatening people with their jobs unless they write in their reports exactly what the ins. co. wants them to say. Look at the heinous activities of the ins. co.s in the Katrina area after the storm. Absolutely criminal. And for the most part, they got away with it.

  17. keepher says:

    Some years ago my car was stolen from my drive way one night. The insurance company offered some completely unreasonable amount for the car. A little known clause in our state law gave me an option, accept the dollar offer or tell them to replace my car. I told them to replace my car, their response was an immediate huge increase in the dollar amount offered.

  18. gman863 says:

    This graph looks like something that will be appearing in ads for “800″ number lawyers within a few weeks.

  19. alpha-omega says:

    Breaking News, The Earth goes around the Sun.

  20. Kisses4Katie says:

    Noooooooooooo I am waiting for an insurance adjuster to determine my pay out on an auto accident that was not my fault. My doctor said I needed lifetime care, and they have been fighting it for over a year and a half. Ridiculous.

  21. apember says:

    Yes the always honest insured persons, who never collude with doctors and lawyers to run up awards are again being cheated by the dishonest big business people.

  22. ICherub says:

    As usual, the Consumerist flock takes a brief pause from hating lawyers to hate the utterly corrupt insurance industry that has been held in check solely by the lawyers that stand up for people. Consider also: I’ve read hundreds of comments about how many lawyers there are in the U.S. (i.e., “far too many”), yet there is also an easy willingness here to damn the entire profession over the tiny percentage that get in the news for being b@stards.