Insurance Companies Using Software Cheat Claimants by Twenty Percent

In October 2010, Allstate agreed to pay 10 million dollars as part of a settlement regarding its use of computer software (Colossus is the name of the computer program) to help determine payments to people with claims. (See Chicago Tribune Article, Former Allstate claims manager offers insight into computerized auto injury payouts)

Mark Romano, one of Allstate’s top people working on its computer software for claims, blew the whistle on Allstate after the settlement because he felt it was far to little for what Allstate was doing.businessman-wearing-boxing-gloves-10098605

Romano revealed how the system works: “when an insurer buys the software, it conducts a “benchmark session” in which, with help from adjusters familiar with certain areas of the country, hypothetical claims are used to set the initial “tuning.” The system that Allstate uses, Colossus, has about 600 codes representing various types of injuries, each of which has a dollar value settlement range. Periodically, an insurer might modify the software, perhaps removing or excluding certain outlying claims or settlements from the database. Those might include cases in which an insured driver has a major disfigurement.”

The end result, according to Romano, is that insurers’ recommended dollar settlement range to consumers is lower. The low end of the range is usually 20 percent less than the value of the claim being studied.

Allstate is just one of the many insurance companies using Colossus or similar programs.