In practicing medical malpractice and personal injury law, Trantolo & Trantolo believes everyone is entitled to equal protection. Yet, when an injured individual is attempting to obtain just compensation, his or her resources fall short. Corporations and insurance companies, when encountering such a lawsuit, will try every tactic to avoid paying, and a recent report, highlighted by The Consumerist, shows that insurance companies persistently underpay injured claimants by manipulating the software program used.
Titled Low Ball: An Insider’s Look At How Some Insurers Can Manipulate Computerized Systems to Broadly Underpay Injury Claims, the report was written by Mark Romano, a former executive for Allstate and Encompass who is now the Claims Project Director for Consumer Federation of America, and J. Robert Hunter, the CFA’s Director of Insurance. The report details the misuse of computerized claims software Colossus by the largest insurance companies to pay policyholders lower than they should actually receive. Colossus, sold and marketed by Computer Sciences Corporation (CSC), is one of the more commonly used claims evaluation programs in the industry.
Romano and Hunter commence with a brief history of insurance claims practices. For years, they detail, injury claims under automobile or home and property insurance were determined by professionals with knowledge and experience, but that system transitioned into assessment done by computer software with payment ranges and codes that can be tweaked or outright changed to improve company profits.
On the surface, Colossus is marketed as a solution for consistency in evaluations, but to insurance companies directly, the software is seen as a system for improving savings, almost as much as 20 percent. Romano and Hunter explain how this is done. First, a “benchmark” session determines the value of an experienced adjuster’s hypothetical claims for specific parts of the country. Then, a “closed file study” determines settled claims values for several injury types from all over the country. These latter values are entered into Colossus to determine the settlement amount, and the insurer compares its first recommendation with what it actually paid. However, if the range does not result in sufficient savings for the insurer, the company adjusts the software program, which results in lower payments for claims.
600 injury codes, each with a severity value and dollar amount assigned, are additionally factored into the cost of a claim. Code values, Romano and Hunter point out, are decided by economic region, which are configured by the insurance company. Then, after time has passed, the settlement data is re-analyzed by region and then “scrubbed” – a term essentially meaning certain data is removed or excluded to skew overall figures in the insurer’s favor. Getting a “payment rate” of 1.00, the high-end settlement amount, is the goal of this practice, and as this figure is considered ideal, adjusters end up settling for lower amount.
Romano and Hunter additionally highlight insurance company practices, familiar to lawyers handling personal injury claims, that yield lower payment amounts. These include:
• Reducing values across all economic region by a predetermined percentage;
• Removing or excluding higher-cost claims from overall figures;
• Manipulating the trauma severity line to achieve desired variables;
• Requiring adjusters to second-guess statements on reports from medical professionals and to alter report details by selecting other injury or prognostic codes to lower settlement values;
• Blocking adjusters from entering information about future conditions or treatments, such as medical visits or permanent impairment;
• Having adjusters run medical bills through re-pricing programs and adding these reduced bill amounts into the software instead; and
• Encouraging adjusters to prove the injured party was negligent in some form.
As Romano and Hunter point out, states have become aware of these practices in recent years, but issues with Colossus and similar programs are frequently undetectable.