Allstate has agreed to pay $10 million to 45 states in a regulatory settlement involving its use of claims handling software.
New York State Insurance Superintendent James J. Wrynn said the agreement follows an 18-month targeted National Association of Insurance Commissioners (NAIC) multi-state market conduct examination of Allstate’s claims handling practices. The agreement calls for Allstate to make some changes in its procedures and for state insurance departments to better train their examiners in how insurers use claims technology.
The NAIC examination, for which New York was one of the lead states, focused on Allstate’s use of claims handling software, particularly the software program, Colossus, which Allstate used to guide its settlement offers for bodily injury claims after automobile accidents. The examination found inconsistencies in Allstate’s oversight of the Colossus software program. In particular, the examination found that Allstate had failed to modify or “tune” the software in a uniform and consistent manner across its claims handling regions.
“It is important to note that we found no systemic underpayment of bodily injury claims,” Wrynn said. “While the issues addressed were serious, Allstate cooperated fully with our examination and is working to correct these deficiencies.”
Allstate said the multi-state review of its claims process confirmed that its use of such technology “provides significant benefits to the public in increased objectivity and efficiency,” and noted that the states “did not identify institutional issues involving underpayment of claims.”
Wrynn said Allstate has agreed to implement new procedures for consumers who have bodily injury claims to ensure that claims will be handled consistently in different regions of the country, and to provide consumers information so they can understand how Allstate evaluates their claims.
Wrynn said that the four lead states in the probe – Florida, Illinois, Iowa and New York – worked cooperatively to conduct this examination and will keep working with the other 41 states that have signed on to the agreement to ensure it is fully implemented.
Under the settlement agreement, Allstate agreed to make a number of changes to its claims handling process, including:
- Providing notice to claimants that the Colossus software program may be used in the adjustment of their bodily injury claims;
- Enhancing its management oversight of Colossus to ensure that it adheres to established criteria and a uniform methodology in selecting claims to be used to “tune” or modify the software to reflect recently settled claims;
- Strengthening its internal auditing of Colossus and bodily injury claims handling to ensure adherence to written guidelines and procedures;
- Consolidating its bodily injury claims handling practices into a single claims handling manual; and
- Not establishing a policy or rule requiring claims adjusters to settle bodily injury claims solely on the value recommended by Colossus and not providing incentives for claims adjusters to settle claims at or near the value recommended by Colossus.
Allstate’s payment will be used by the 45 signatory states to better train their examiners in the property/casualty industry’s use of software technology in adjusting claims.