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Consumer Federation of America Claims Insurance Companies Use Software to “Low-Ball” Customers

By Rheingold Giuffra Ruffo Plotkin & Hellman LLP

A new report from the Consumer Federation of America (CFA) claims that claims software programs used by large auto and home insurance companies in the U.S. allow companies to manipulate claim payments and “low-ball” their clients. According to the report, claims software programs, such as Colossus, have been used by various U.S. insurance companies for over 15 years and allowed them to save up to 20% on liability claims.

Function of the Claims Software & Potential of “Low-Balling”

The Computer Science Corporation (CSC) markets claims software like Colossus as a “large knowledge base of medical and insurance-adjusting information,” says Ed Charlton, vice president of CSC’s property and casualty insurance division. Companies, particularly in auto and home insurance, use these programs to evaluate injury liability claims that clients have filed. By using the claims software, companies can take unique case-by-case factors into consideration while maintaining professional consistency in financial values.

Upon inspection, CFA finds that insurance companies can use programs like Colossus to “tune” the payment perimeters of a liability claim, or even reclassify an injury as less serious than what was diagnosed by doctors in order to reimburse less to the clients. If true, this could be a critical issue as these software programs are marketed with the objective of providing consistent and professional evaluations for insurance companies. Robert Hunter, a former insurance commissioner, says that he is “convinced there are millions of Americans still at risk” of being “low-balled” by these insurance companies.

Other Possible Loopholes for “Low-Balling”

Claims software is not the only possible loophole in “low-balling” clients, some argue. Trade associations such as the American Insurance Association (ASA) question the extent of CFA’s claim. Willem Rijksen, vice president of public affairs at ASA, states that insurance companies use “trained claims adjusters” throughout the process of determining the finances of liability claims, and therefore do not rely solely on claims software. Charlton also added that the payments are ultimately negotiated “between the insurance company and its claimants.”

The CFA is continuing its investigations on claims software vendors and insurers for unfair business practices, attempting to pinpoint a cause for unjust discrepancies in consumer liability claims.

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