Some years ago, Allstate Insurance, in its never ending quest to maximize profits, came up with a software program called “Colossus”. The program took the details of a personal injury case (such as bills, injuries, treatment, etc.) and used algorithms to determine how much money, if any, was to be paid out in settlement.
Allstate of course, used Colossus to crank down payouts on personal injury claims. At about the same time, they came up with another strategy to help the bottom line. Enter the “Delay, deny, and defend” program. Under this program, Allstate would drag their heels on a personal injury case, knowing that delaying tactics always benefit the person who has to pay, not the victim who is supposed to get compensated. In other instances Allstate would just deny a claim, regardless of the validity, hoping the attorney or the victim would rather give up than jump through all the hoops and court costs needed to recover.
For some, treating accident victims badly, although unseemly, was alright, since the company’s first obligation was to protect their insured from claims. But then Allstate started to use the same programs with their own customers. People who purchased Allstate and tried to make claims under their own uninsured motorist coverage, started getting the same treatment other accident victims experienced.
Now, because of a multi-state investigation into Allstate’s handling of personal injury claims, the Northbrook based company has agreed to create a $10 million “education fund” to provide training to state insurance agencies so regulators can determine if the software is being used properly. New York State Insurance Superintendent James Wrynn said that the fund will provide insurance examiners with further training and development.
Examiners in 45 states signed the agreement to review and scrutinize the industry’s use of software programs like Colossus in personal injury claims adjusting. Allstate also committed to implementing new methods of ensuring claims are handled consistently across the country (which is what the Colossus program was supposed to do in the first place).
Allstate, which has cooperated with the investigation, maintains the software provides significant benefits to the public through increased objectivity and efficiency. But the aforementioned investigation found “inconsistencies in Allstate’s management and oversight” of Colossus. In other words, it was being used differently in different areas of the country. These problems led to the establishment of the $10 million fund. Whether the fund leads to a more uniform and fair claims handling process by Allstate remains to be seen.
