Accident lawyer explains how Colossus manipulates the value of personal injury cases, and how car accident victims can protect themselves
I’ve been blogging about Allstate and its misuse of Colossus software. Colossus, for my non-accident lawyer readers, assigns a dollar value to an auto accident victim’s bodily injury claim, based on information provided by an insurance adjuster. Then, the same adjuster uses the Colossus figure to make a low-ball settlement offer to an unsuspecting auto accident victim.
It was how these payouts were designed to be slashed — therefore increasing insurance company profits — that got Allstate into so much recent trouble.
As a result of the examination, Allstate promised insurance commissioners across the country — including Michigan’s Insurance Commissioner, Ken Ross — to change how it uses Colossus in its auto claims handling process. Allstate’s promise is contained in the “Multi-State Market Conduct Regulatory Agreement,” which Allstate signed in August 2010 and Michigan’s Insurance Commissioner signed in October 2010.
Colossal controversy over ‘Colossus’
Allstate first started using the Colossus software program in the 1990’s as part of its strategy to increase profits by reducing the size of auto claims payouts. These efforts quickly crossed into bad faith claims handling and deliberately frustrating legitimate accident and injury victims, and efforts to dissuade accident lawyers from taking certain types of auto accident cases.
According to the Consumer Federation of America, the sales literature published by Colossus’s manufacturer “touted Colossus as ‘the most powerful cost savings tool’ and also suggested that, ‘the program will immediately reduce the size of bodily injury claims by up to 20 percent.'” (Consumer Federation of American, “The ‘Good Hands’ Company or a Leader in Anti-Consumer Practices? Excessive Prices and Poor Claims Practices at the Allstate Corporation,” July 18, 2007, at 21)
Indeed, the reality lived up to the hype.
Between 1995 and 2005, “the amount of money [Allstate] paid out per premium dollar in car accident cases declined from about 63 cents to 47 cents, according to A.M. Best.” (BusinessWeek, “In Tough Hands at Allstate,” May 1, 2006)
Not surprisingly, the qualities that endeared Colossus to Allstate were the same qualities that caused so much frustration from auto accident victims and the accident and injury lawyers helping them. Colossus allowed Allstate (and any auto insurance company that used it) to artificially and self-servingly drive down injury values. Allstate’s adjusters controlled the information fed into the Colossus program and in turn, they could reduce the benchmark or baseline values for various injuries, for example, by only inputting the lowest settlement amounts.
Additionally, Allstate would offer rewards to insurance claims adjusters who settled within or, even better, at the low end of the value ranges identified by Colossus. And adjusters who settled too high relative to the Colossus figure were reprimanded and/or punished.
How car accident victims can protect themselves from Colossus
After the agreement was signed by Allstate in August 2010 and Insurance Commissioners around the country began signing on, the Consumer Federation of America weighed in with tips for how auto accident victims can protect themselves against being taken advantage of by auto insurance companies that use Colossus claims handling software.
In a December 9, 2010, Consumer Alert, the CFA offered the following advice concerning Colossus:
1. “Find out if a computer program was used to evaluate your (car accident) claim.”
2. “Demand to see the range of results the computer generated. … If any insurer refuses to show you the range, file a complaint with your state insurance department.”
3. “Do not accept any (settlement) offer less than the ‘high’ end of the range, and consider making a counter-offer that is above the high offer.”
4. “If the insurer does not agree to settle at the high end of the range, consider filing a complaint with your state insurance commissioner and seeking legal help with your claim.”
If you’ve been injured in a car accident and need advice, feel free to call one of our accident lawyers at (800) 777-0028. There is no cost or obligation. We can make sure your auto insurance company doesn’t take advantage of you.
– Steve Gursten is recognized as one of the nation’s top lawyers handling serious car accident and truck accident lawsuits, and No-Fault litigation. He routinely writes about insurance company abuse and the No-Fault laws in Michigan, and is available for comment.
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