Report: Insurers Manipulate Systems To Underpay Claims
|By Becky Yerak, Chicago Tribune|
|McClatchy-Tribune Information Services|
The report was issued Monday by the
"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," Romano said in a statement.
Romano worked on the Colossus injury claims' evaluation system at Allstate and its Encompass unit for almost 10 years. Colossus, which the CFA says is the dominant claims system in the marketplace, is sold by
"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," Romano said. But "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 is called "
The report includes excerpts from recently released court records in a class-action lawsuit, Hensley vs.
For example, 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.
"These documents show that most of the nation's top insurers used the Colossus system in ways that put millions of American consumers at risk of not getting the claims payments that they paid for with their premiums,"
In an media call, Hunter said
It asked the
"The NAIC should thoroughly investigate methods that all large insurers can or do use to directly or indirectly reduce claims' payouts in an illegitimate manner," the CFA said. The CFA said the NAIC and state regulators signed an agreement with Allstate in 2010 that required the company to make only "a few small changes in how it used Colossus."
Consumers groups have long called for insurers to disclose how they determine payouts.
In 2008, Allstate posted about 150,000 pages on its Web site that included the long-coveted "McKinsey documents" -- reviews prepared by McKinsey & Co., the consulting firm for the
Critics of the nation's biggest publicly traded home and auto insurer have tried for years to get courts to force Allstate to turn over the documents, claiming they hold the secret to what they say is the unfair treatment of policyholders.
McKinsey suggested strategies for Allstate to lower its claims-processing costs.
For years, Allstate refused to make the documents publicly available, calling its actions "respectful civil disobedience" and saying trade secrets were involved.
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