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Allstate sin No. 1: Using Colossus to harm injured auto accident victims

July 9, 2011 by Steven M. Gursten

Michigan No-Fault lawyer explains how Allstate targeted legitimate accident victims with computer program to improperly boost profits

Last week, I perhaps cynically wondered if Allstate’s new “claims satisfaction guarantee” is to make up for so many of its sins.

It wasn’t very hard to rattle off a number of sins, and since so many honest and legitimate auto accident victims were harmed by Allstate’s conduct for years, I decided it would be fitting to discuss each in more detail. Allstate’s first sin involved a computer program called Colossus that the insurer used to improperly low-ball car accident victims and force them to take lower pain and suffering settlements to save itself bundles of money:

Allstate Insurance has recently confessed to using the computer program called Colossus to reduce settlements for auto accident victims in Michigan, and increase their already obscene profit margin.
According to the Consumer Federation of America, the sales literature published by Colossus’s manufacturer boasted that “‘the program will immediately reduce the size of bodily injury claims by up to 20 percent.'” (Consumer Federation of America, “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)

As it turns out, the Colossus manufacturer was right. 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)

Critics of the Colossus program insist it allows Allstate (and any auto insurance company that used it) to artificially and self-servingly drive down personal injury values. Allstate’s adjusters control the information fed into the Colossus program and, thus, they can reduce the benchmark or baseline values for various injuries, for example, by only inputting the lowest settlement amounts.

Additionally, critics also accuse Allstate of offering rewards to adjusters who settle within or, even better, at the low end of the value ranges identified by Colossus. And critics also suspected the converse was true: adjusters who settled too high relative to the Colossus figure were reprimanded and/or punished.

Next week I’ll write about Allstate’ sin No. 2: Targeting auto accident victims who had the “audacity” to hire a lawyer to protect them and their rights to No-Fault insurance benefits.

Steven Gursten is recognized as one of the nation’s top No-Fault lawyers handling serious auto accident cases. He writes about insurance company abuse and the Michigan insurance laws, and is available for comment.

– This blog was written by Steven Gursten and Todd Berg, esq.

Related information:

Tips for dealing with Allstate, Colossus claims software in Michigan

Allstate’s agreement to change its use of Colossus: A start to slowing insurance company abuse?

Michigan’s 6 worst auto insurance companies

Michigan Auto Law is the largest law firm exclusively handling car accident, truck accident and motorcycle accident cases throughout the entire state. We have offices in Farmington Hills, Detroit, Ann Arbor, Grand Rapids and Sterling Heights to better serve you. Call (248) 353-7575 for a free consultation with one of our No-Fault insurance lawyers.

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