When policyholders are injured in an automobile accident, they expect their insurer to honor their contractual obligation and pay the claim. However, thanks to computerized claims systems, there is a chance that injured drivers won’t get their full payout, according to a new report from the Consumer Federation of America (CFA).
Insurance companies handle countless claims every year that all require time, man power, and money to process. To help save time and cut costs, many producers rely on automated programs to tackle these payouts. The problem, according to CFA, is that programs like Colossus can be easily manipulated to lowball claim payouts made to injured consumers.
In a new report released in June, the CFA focuses on flaws integrated into Colossus, a commonly used software product produced by Computer Sciences Corporation. Researchers found that this software could be adjusted to allow insurers to increase their profits by reducing the amount paid to customers who file bodily injury liability claims.
Insurers integrate Colossus into their system by allowing the software to sample multiple claims so that an average payout can be determined for a variety of situations. Once this software is able to produce an estimated settlement value, producers make adjustments to these calculations. However, these adjustments often favor the coverage provider, the CFA alleges, producing settlements that are lower than a consumer would typically receive. After Colossus has been extensively fine-tuned to produce accurate settlements, it can be used to automatically determine claim values.
Unfortunately, the CFA found that insurance companies are able to manipulate this software in a number of ways. For example, producers could omit higher-cost claims from the tuning sample to produce lower results, or leave out information about the likelihood of a customer requiring future medical attention after an accident. By making these minor alternations, insurers can covertly reduce the average amount that the company pays in bodily injury claims.
CFA Calls for Wider Investigation
In an effort to save time and money, many different policy providers employ these systems to handle insurance settlements. To combat the abuse of this software, however, the CFA has urged the National Association of Insurance Commissioners (NAIC) to closely examine these practices. Additionally, the CFA recommends that insurers notify consumers in writing when a claim has been assessed by a computerized system.
Consumers who may be wary of these automated payout systems may want to ask whether a company uses such software while making an auto insurance comparison. Contacting a company directly and speaking with a knowledgeable representative could help drivers better understand the widespread use of these systems.