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Published on Jun 12, 2012 by Edgar Snyder

Insurance Companies "Lowball" Injury Claim Payouts

lowball payouts

Consumers who pay premiums to insurance companies expect that those companies will be on their side if they are injured in an accident. However, a recent report issued by the Consumer Federation of America warns that most of the nation's largest insurance companies use computer software that can be easily manipulated to pay out less than what policy holders deserve.

The report detailed a number of ways insurance companies use a computer software program known as Colossus to produce "lowball" payouts for their policy holders' injury claims. According to the report, Colossus and similar programs give insurers the ability to input biased or incomplete information into their systems to reduce claim payouts.

The report says that these programs allow insurers to:

  • reduce payouts by a predetermined amount across the board without first determining whether this will lead to unjustifiably low payments for policy holders.
  • remove higher-cost claims from data used to determine an acceptable settlement range for particular injuries which can lead to lower payments for all claims of that type.
  • allow insurance adjusters without any formal medical training to second-guess doctors' injury determinations and select less severe injury codes to produce lower payouts.
  • encourage adjusters to downplay or ignore the likelihood that an injured individual may need future medical treatment or will be permanently disabled, thus lowering their payments.
  • encourage adjusters to determine that drivers are partially at fault for the car accident that injured them, even if they may not be.

Recently, a class action lawsuit was filed against the manufacturer of Colossus, Computer Sciences Corporation (CSC). Court documents revealed that the company misled regulators about the purpose of Colossus, claiming that its main function was to produce more consistent payouts. However, CSC marketed the program to insurance companies as a way to achieve enormous savings through lower insurance payouts.

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"Report: Insurers Can Manipulate Computer Systems to Broadly Underpay Injury Claims." The Consumer Federation of America. June 4, 2012.
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