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.