Report Points Out Possible Flaws in Computerized Insurance Claims Systems

When policyholders are injured in an automobile accident, they expect their insurer to honor their contractual obligation and pay the claim. However, thanks to computerized claims systems, there is a chance that injured drivers won’t get their full payout, according to a new report from the Consumer Federation of America (CFA).
Insurance companies handle countless claims every year that all require time, man power, and money to process. To help save time and cut costs, many producers rely on automated programs to tackle these payouts. The problem, according to CFA, is that programs like Colossus can be easily manipulated to lowball claim payouts made to injured consumers.
In a new report released in June, the CFA focuses on flaws integrated into Colossus, a commonly used software product produced by Computer Sciences Corporation. Researchers found that this software could be adjusted to allow insurers to increase their profits by reducing the amount paid to customers who file bodily injury liability claims.
Insurers integrate Colossus into their system by allowing the software to sample multiple claims so that an average payout can be determined for a variety of situations. Once this software is able to produce an estimated settlement value, producers make adjustments to these calculations. However, these adjustments often favor the coverage provider, the CFA alleges, producing settlements that are lower than a consumer would typically receive. After Colossus has been extensively fine-tuned to produce accurate settlements, it can be used to automatically determine claim values.
Unfortunately, the CFA found that insurance companies are able to manipulate this software in a number of ways. For example, producers could omit higher-cost claims from the tuning sample to produce lower results, or leave out information about the likelihood of a customer requiring future medical attention after an accident. By making these minor alternations, insurers can covertly reduce the average amount that the company pays in bodily injury claims.

CFA Calls for Wider Investigation

In an effort to save time and money, many different policy providers employ these systems to handle insurance settlements. To combat the abuse of this software, however, the CFA has urged the National Association of Insurance Commissioners (NAIC) to closely examine these practices. Additionally, the CFA recommends that insurers notify consumers in writing when a claim has been assessed by a computerized system.
Consumers who may be wary of these automated payout systems may want to ask whether a company uses such software while making an auto insurance comparison. Contacting a company directly and speaking with a knowledgeable representative could help drivers better understand the widespread use of these systems.

The Questions that Motorists Should Be Asking Their Insurers

Most people need auto insurance to legally drive, and many motorists buy the first policy they find and only interact with their insurer if they’re involved in an accident. The problem with this method is that it can lead to unnecessarily high premiums and complications after filing a claim. Taking the time to periodically ask your insurer a few questions about your policy can have some significant benefits. Here are just a few that can be answered in a matter of minutes:

Could I Be Getting Cheaper Coverage?

Over time, driving records, coverage needs, and vehicle values change. Depending on the situation, these changes can sometimes amount to significantly cheaper premiums. The DUI conviction or the at-fault accident on your driving record from three years ago may no longer be applicable, and that expensive new car that you purchased at the same time as your insurance policy has seen better days. People who annually contact their insurer to update their plans often have a better chance of avoiding unnecessary coverages and other expenses that may no longer be applicable.
Sometimes insurers’ pricing structures change without notice, and some insurers put the burden on the policyholder to call and get re-rated, according to the story of one man published in The New York Times. In that report, an Arizona driver, Thomas Mitchell, had his premiums cut in half after his insurer changed its underwriting guidelines. But the only reason Mitchell saw the premium decrease was that he called his insurer to ask about pricing when he got a better offer from another company. If he hadn’t taken the initiative to ask whether cheaper coverage was available from his insurance provider, he’d still be paying $2,500 a year instead of $1,207, his new premium.

How High Will My Insurance Rates Go Up After an Accident?

After being involved in an accident, policyholders can usually count on their premiums to go up, but by how much? Taking the time to ask auto insurance claims questions can help drivers avoid being blindsided by charges after filing a claim. When buying a policy, it may be good to get a ballpark estimate on possible surcharges for citations, moving violations, and automobile accidents. Companies often will have unique charges that are applied after specific events, while others may be more forgiving.
In some states, however, charges are mandated by law. Motorists who get into accidents in North Carolina, for example, are subject to increases outlined in the Safe Driver Incentive Plan (SDIP), which is designed to institute uniform increases after accidents and traffic violations. For example, with the SDIP, a driver who causes an accident that results in $1,800 or less in total damages will get one point on his or her record, which brings with it a 30 percent increase. If he or she were to get a ticket for aggressive driving, an 8-point violation, premiums would increase by 195 percent from the original rate. The SDIP point and rate-increase schedule can be found in the state’s consumer guide to automobile insurance.

What Discounts Can You Offer Me?

Discounts can be one of the best ways for drivers to save on auto insurance, but people often need to ask about these savings. Because vehicle coverage is a competitive market, insurers are constantly on the lookout for new ways to attract customers, making special offers a common commodity. In states like Connecticut, some savings are mandated. For example, drivers in that state who are age 60 or older are entitled to a minimum 5 percent premium reduction if they complete a DMV-approved accident prevention course. Other states may have mandated discounts for equipping the insured car with antitheft devices. If a driver has any of these devices active on the car, it’s on him or her to let the insurer know about it so that the appropriate discount will be applied.

The Fundamentals of Accident Forgiveness

Car accidents and higher auto insurance premiums almost always go hand-in-hand. When drivers file an accident claim, their insurer will usually reassess the driver’s accident risk and may apply a surcharge. To make matters worse, these claims are likely to stay on a person’s driving record for at least three years, making it difficult to get cheaper coverage from another company. In response to customer anxiety, many insurers have started offering “accident forgiveness” to loyal customers who meet the necessary requirements. The only catch is that these programs aren’t always what they seem.

​Availability of Accident Forgiveness

Popular online car insurance companies like Progressive, Allstate, and Nationwide all claim to offer lower rates through a system that agrees to “forgive” an accident to prevent rates from climbing after filing a claim. The problem, however, is that coverage providers cannot permanently erase an automobile accident; they can only choose to ignore the incident when calculating the driver’s premium. This means that receiving forgiveness from your insurer won’t do anything for a blemished driving record.

People are Taking Notice of Potential Pitfalls

Writer Jessica Bosari of Forbes warns motorists that these special offers may seem appealing, but in reality they may not offer very much in savings. She urges vehicle owners to be wary of insurance companies that throw around the word “forgiveness.” Although a policyholder’s premium may not be as affected by a collision after filing a claim, the fact that the motorist was involved in a collision is still relevant. Drivers may end up losing their good driver discount or become ineligible for certain savings that are contingent on keeping a clean driving record. Motorists should remember that forgiven doesn’t necessarily mean forgotten.
As these special offers become more popular, some state governments have started encouraging drivers to fully research a potential insurance provider before completely giving in to the idea of claim absolution. The Massachusetts Department of Consumer Affairs and Business Regulation reminds residents that not all programs are the same.
While some companies offer these savings freely without question, others may have fairly steep requirements that must be met before an incident can be ignored. Motorists with Nationwide, for example, need at least five years of driving experience without being involved an at-fault accident in order to become eligible for these savings.
One final point that drivers should remember is that these reduced rates may not carry over to another company. If a policyholder decides to switch insurance companies, they may be surprised to find that the previously forgotten accident on their record is suddenly the center of attention, potentially leading to higher rates.