Report: Some Insurers ‘Low-Balling’ Auto Insurance Claims for Bodily Injury

December 29, 2010

Some insurance companies that use computerized systems to process their claims are making unfair, “low-ball” claims offers to people injured in automobile accidents, according to a consumer advocacy group.

The Consumer Federation of America (CFA) is warning Americans that Colossus software and other similar programs used by insurers evaluate general damages for many bodily injury claims such as pain, suffering and anguish, but fail to estimate “special” damages such as past or future bills related to losses and reductions in wages or liability-related questions, or issues like the credibility of witnesses.

Advising consumers to protect themselves against underpayments, J. Robert Hunter, CFA director of insurance, said, “Consumers should be very vigilant when dealing with automobile bodily injury claims generated by computer programs.” He said insurers can adjust their computer systems to generate claims’ ‘savings’ without adequately examining the validity of each claim.

When adjusting a bodily injury claim, an adjuster typically sorts through medical records and determines which of the approximately 600 Colossus injury codes best reflect the bodily injuries sustained by the consumer, according to CFA. Depending on the severity value accompanying the injury code and dollar value that has been assigned by the insurer for each severity value point, the software provides a dollar value range to the adjuster for general damages.

“Some insurers also can tune the programs so that the claims that are made are ‘low-balled’ to save costs, even if a higher offer may be justified for some consumers. Further, adjusters sometimes receive incentives for settling claims at or near the range stipulated by Colossus,” CFA said.

Several of the industry’s largest carriers use or have used Colossus or similar software programs, CFA said.

CFA is recommending consumers protect themselves from unjustifiably low claims’ offers by:

• Find out if the offer is generated by a computerized system like “Colossus.” Allstate is required to disclose this information, but disclosure is voluntary for other insurance companies.

• Ask to see the high and low offers generated by the system.

• Do not accept any offer less than one in the “high” end of the range.

• If the insurer does not agree to an offer at the high end of the range, consider filing a complaint with the state insurance commissioner or seeking legal help.

A copy of CFA’s complete consumer alert is available at www.consumerfed.org/pdfs/Claims_Consumer_Alert_12-8.pdf.

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