Allstate Fined $10M for Colossus Computer Claim Handing Process
Posted on behalf of RizkLaw on Oct 19, 2010 in Insurance Issues
In October 2010 Allstate Insurance agreed to pay a $10M settlement for improper use of a claim software known as “Colossus”. Colossus is is used by insurers to help analyze auto accident bodily injury claims.
The Allstate settlement follows an 18 month investigation into Allstate’s settlement practices. The investigation revealed Allstate did not consistently adjust the software. Colossus software and other similar software have been used by Allstate and other insurers to help calculate settlement offers.
In light of this settlement, Allstate is required to make changes to its claim handling process. Those changes require Allstate to:
- Update oversight of so that it is “tuned” more consistently;
- Notify claimants when Colossus will be used to analyze claims;
- Increase Colossus auditing to ensure adherence to internal guidelines;
- Consolidate bodily injury claim practices into a single manual; and,
- Eliminate incentives for claims adjusters to base settlement value at or near the Colossus value
Allstate’s reputation took a hit after revelations that consultant McKinsey & Co (also an Enron consultant) had advised Allstate to give the “boxing glove” treatment to third party claimants and even its own policy holders who had not accepted Allstate settlement offers. McKinsey also advised Allstate to stall such not settling victims. Allstate points out that this advice was given 15 years ago.
In spite of the above, Oregon Allstate and its attorneys have been generally easy to deal with. It is always a good idea to check insurer complaint levels with the Oregon Insurance Commissioner prior to purchasing auto insurance.