The Insurance Journal recently reported that Allstate Insurance (the second largest automobile insurance carrier doing business in Florida) has paid a $10 million regulatory penalty to 45 states in connection with an investigation done by the states’ insurance commissioners primarily over the way that Allstate was allegedly handling personal injury claims. The fines followed an 18-month investigation into Allstate’s claims-handling processes, and particularly those associated with a software program known as Colossus.
Allstate had drawn scrutiny over its nationwide use a software program called Colossus to “guide” its adjusters with their claims evaluations. State insurance commissioners were suspicious about whether Allstate had “fine-tuned” Colossus to vary its evaluations depending on the claims region involved. For example, insurance commissioners were interested in determining whether Colossus valued claims in Wyoming car accidents the same as Florida car accidents. It is only common sense that people who are injured in states where jury verdicts are generally higher, deserve to receive higher settlement offers than people who are injured in low verdict states — everything else being equal.
Allstate voluntarily paid the fines, but both Allstate and the insurance commissioners were quick to note that there were no specific allegations or findings of systemic underpayment of claims.
Nevertheless, Allstate agreed to make numerous changes to its claims-handling methodology, including:
- Notifying consumers and claimants about Colossus and how it is used.
- Improving management oversight into how Colossus is used to evaluate or assist with claims.
- Agreeing not to settle claims solely upon the recommendation of Colossus.
- Agreeing not to provide incentives to claims adjusters to settle claims at or near the Colossus evaluation.
- Making sure that Colossus evaluates claims consistent with written Allstate guidelines.
In my opinion, it is about time that Allstate was forced into making commitments like those referenced in the settlement with the insurance commissioners. It will be interesting to see if the insurance commissioners do anything to enforce the agreements made by Allstate.
Our experience with Allstate is that fewer claims have been quickly or easily resolved since Collosus was instituted. Adjusters simply don’t seem to have the authority or the flexibility to consider information or facts that don’t fit into a computerized-type formula.
In Florida, insurance companies owe claimants a duty to use good faith in handling and paying claims. Insurance companies should resolve claims when they can and should do so. This duty applies whether the insurance company is using a computer, or not. After all, computers can only analyze the data they are fed.
Hopefully, we will see a change in Allstate, but I am not overly optimistic.
