Allstate to Pay $10 Million in Claims-Handling Investigation
Insurance giant Allstate Corp., the parent company of Allstate Insurance Co., has agreed to pay $10 million to settle an investigation pending against it by 41 states and led by New York, Florida, Illinois, and Iowa. Investigators were reviewing Allstate's use of Colossus, a computer software system used in determining the value of personal-injury claims in motor vehicle accidents.
The Colossus program has been used by Allstate and more than 50 percent of the nation's claims adjusters, according to representatives of CSC Inc., the owner of the system. Allstate started using Colossus in 1995.
The Colossus Program
The program provides a range of settlement figures after adjusters have entered the type of injury and other relevant information. Because no two adjusters evaluate the value of a personal injury in exactly the same way, the purpose of Colossus is supposedly to provide uniform evaluations of personal injuries within the same geographic regions.
Investigators criticized Allstate's inconsistent oversight of adjusters using the program. They also found that Allstate failed to modify or "tune" the program in a consistent manner across all its claims-handling regions. Investigators stopped short of finding any systemic underpayment of claims by Allstate or its adjusters.
As part of the settlement, Allstate agreed to notify all claimants that it may be using the Colossus software when evaluating their claims. Improved oversight to ensure that the software is regularly tuned to include recent settlements was also required. Allstate further agreed to revise its internal auditing, to consolidate its claims-handling manual, and to neither require nor encourage its adjusters to base settlement offers solely on recommendations from Colossus. The $10 million fine will be used to develop and train state insurance department employees to monitor insurance industry usage of computer programs to handle claims.
Although the settlement does not provide for any payments to individual claimants or insureds, it does affect how Allstate will be able to settle bodily injury claims going forward. If you are injured by a motor vehicle driven by an Allstate insured, you should consult with a competent personal injury attorney to ensure that your claim is handled and settled fairly.
Sources: Buffalo News