Insurer Robo-Settlement Offers Take a Hit

Allstate Insurance Co. will pay $10 million to put an end to an investigation of how it uses a computer software program to settle car accident claims.

The investigation, launched by the National Association of Insurance Commissioners (NAIC), looked into Allstate's use of a program called Colossus. The software uses highly technical computer algorithms to come up with suggested settlement amounts for personal injuries, based on a database of claims for similar automobile accidents.

However, NAIC investigators found that management and oversight of the software program was lacking - specifically in the area of "tuning" of the software. The NAIC found that when adjusting its software, Allstate didn't always account for differences in accidents in different parts of the country, such as Colorado car accidents, and didn't adequately use recent cases it had settled.

Insurance industry whistleblowers are more blunt about what Allstate and other insurance companies were up to. They say insurers developed benchmark settlement values for various types of car accidents - and then routinely lowered those suggested settlement offers by 20%. Seattle's newspaper reports that Allstate and Farmers Insurance separately told investors in 2001 that a year after "tuning" their Colossus software, their claims had been reduced by 20%.

Coincidence? Hardly.

Under terms of the settlement, announced by New York's insurance commissioner, Allstate agreed to pay 45 state insurance commissioners a share of the $10 million, let people who file claims know when if it will use Colossus for their claim, enhance oversight of the program, and make it clear to its adjusters that they don't have to settle claims using a number Colossus suggests.

At The Law Offices of Dianne Sawaya, we're not holding our breaths that this will change much in insurance company settlement offers. When it comes to dealing with victims of Colorado car accidents and Denver personal injury victims, the name of the game for insurance companies is simple: pay as little as they can get away with, and keep as much of the premium as they can. They don't need a computer program to do that.

If you've been hurt in a Denver car accident, give me a call at (303) 758-4777 or email me at DLS@dlslawfirm.com. Let's talk about your case.