The biggest insurance companies in the country may have been cheating on the numbers, and injury victims may have been getting much less than what they are entitled to get under the language of their insurance policy contract. That’s according to a new expose from a consumer watchdog report, in a report issued last week.
If so, that is bad faith insurance abuse across the board. That’s against state law — intentional bad faith by an insurance company is the basis of a cause of action by the injured person against the insurance company. Expect the plaintiffs’ lawsuits to start being filed. Soon.
What is happening? The Consumer Federation of America (CFA) warns that computerized systems for processing insurance claims’ by the nation’s largest insurance carriers can be “easily adjusted to make broad-scale “lowball” claims’ payments….” Imagine that. The entire report is available for download here.
“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,” said Mark Romano, CFA’s Claims Project Director. Romano was the “subject matter expert” on the Colossus injury claims’ evaluation system at Allstate and Encompass insurance companies for almost ten years. Colossus, which is the dominant claims’ system in the marketplace, is sold by Computer Sciences Corporation (CSC).
“When CSC and its competitors talk publicly about computer-based claims’ systems, they stress that the programs allow insurers to more consistently evaluate bodily injury claims,” said Romano. “Consistency is a legitimate goal, 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.”
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 products by insurance companies. It provides considerable information about how these programs are set up, “tuned” to reach particular claims’ payment monetary goals and adjusted over time. The report also identifies specific techniques that insurers can use to directly and indirectly produce “lowball” claims:
- 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.
“Many of the concerns about Colossus and similar programs have focused on the potential for insurers to manipulate these systems directly in order to reduce claims’ payouts,” said Romano. “But insurers can also use many techniques to unjustifiably lower payments in a more subtle manner, by putting biased or incomplete information into the system.”
The report includes excerpts from recently released court records in a major class action lawsuit, Hensley v. Computer Sciences Corporation, that reveal disturbing information about how Colossus and similar products are marketed to and used by insurance companies:
- 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.