How Do Insurance Companies Calculate a Personal Injury Claim?

By: Heath C. Murphy + – Car Accidents

Property damage claims are fairly straightforward to determine. The value of the property can be determined by the marketplace. Personal injury claims, on the other hand, are more complex. One reason is that it is very hard to calculate pain and suffering. Another reason is because of the unpredictable nature of jury awards. Two different juries hearing the same case with the same facts and the same lawyers presenting evidence in the same way are likely to arrive at two differing damage calculations. Insurance companies do not like uncertainty and have sought to remove it from negotiations with people injured in accidents.

History of Personal Injury Claims

Until the 1990s, insurance adjusters had broad authority to evaluate and pay personal injury claims. Adjusters actually met the injured people and evaluated their credibility and strengths and weaknesses as potential witnesses. They heard the story the jury would hear and would make offers based upon actual quantifiable losses and their evaluation of the injured person. In the 1990s that all began to change with the creation of Colossus.

What is Colossus? How Insurance Companies Use Software to Evaluate Personal Injury Claims

Colossus is a computer program originally created for Allstate that assigns values to personal injury claims. Colossus is believed to be used by Aetna, Allstate, CNA, Erie, Farmers, Metropolitan, Ohio Casualty, Hartford, MetLife, Travelers, USAA, and Zurich to estimate personal injury claims from auto accidents and motorcycle accidents. Every insurance company that uses Colossus will state that it is merely a tool to uniformly evaluate all insurance claims, but according to former employees, it has been used to systematically generate low offers at the expense of injured people to generate record profits for insurance companies.

Colossus’s estimation is based on numerous factors that negatively affect a claim and lower the value of the case. Employees of the companies utilizing Colossus will enter information from the medical records of the injured party. Colossus will then simply assign a value to an auto accident victim’s bodily injury. It awards higher value for injuries like broken bones and gives greater value to victims who went to the hospital immediately after the accident. As such, Colossus allows any auto insurance company that uses it, to artificially drive down injury values. The insurance companies also control the information fed into the Colossus program and in turn, they can reduce the benchmark or baseline values by only inputting the lowest settlement amounts.

Colossus Investigation

The National Association of Insurance Commissioners, along with the Florida, New York, Iowa, and Illinois insurance departments conducted an 18-month investigation into Allstate’s use of Colossus. The investigation found “inconsistencies in Allstate’s management and oversight” of Colossus. Essentially, the investigation concluded that there were no internal procedures in place that would ensure that Colossus was properly given the information necessary to properly evaluate the claims. Jury verdicts that were deemed unusually high could be excluded and information necessary to fine-tune the program could be omitted. Allstate paid $10,000,000 to settle the claims against it but did very little to change the process and oversight of the program.

More Evidence Against Colossus

In 2012, Mark Romano, a former employee of Allstate, co-authored a paper entitled “Low Ball: An Insider’s Look at How Some Insurers Can Manipulate Computerized Systems to Broadly Underpay Injury Claims.”[1] Mark Romano is a Tampa native and a former Allstate employee who was paid to implement the Allstate version of Colossus.

Mr. Romano learned that if he made minor tweaks or “turned a few knobs,” he could generate millions in savings for the company. Mr. Romano’s knob-turning generated savings of $33,000,000 in his first 3 years on the job. Exploiting inconsistencies in the computer program is merely one method insurance companies have used to save money at the expense of their insureds. Mr. Romano has alleged that Colossus can be manipulated to produce “low ball claim’s offers” by:

1. “Tuning the program” by predetermined percentages. This will reduce the top-end claim amount and therefore decrease the maximum amount the adjuster may offer to resolve the case.

2. Selectively excluding high-end claims from the calculations.

3. Manipulating certain “user-friendly” features of the program to create arbitrarily low settlement offers.

4. Having adjusters who enter the medical information routinely second guess medical professionals regarding the severity of injuries.

5. Having adjusters arbitrarily enter a final prognosis that is favorable to a lower payment amount.

6. Having adjusters arbitrarily enter permanent impairment ratings into the program.

In conjunction with Colossus, Allstate, at one point in time implanted a policy that has become known as the “Good Hands, Boxing Gloves” policy. Essentially, it has been alleged that Allstate trained its employees to build a rapport with customers and discourage them from hiring lawyers to handle their car accident claims. They would pay these claims to these unrepresented persons within 180 days, but their insured clients who hired an attorney would get the boxing glove treatment. The goal was to delay payment for 3-5 years. According to David Berardinelli, an attorney who sued Allstate for these practices, the “good hands” approach actually consisted of stringing along the insureds for several months, and then as the financial pressures on the injured person mounted, a lowball offer would be made, and often accepted.[2]

Though several states are attempting to place more regulations on the use of Colossus, it is unlikely to be banned in the near future. For those injured in a car accident, it is important to hire an attorney who is familiar with injury calculations used by the big insurance companies, but who is also able to evaluate claims on a case-by-case basis and be willing to call the insurance companies on low ball offers and proceed to trial.

Contact an Experienced Car Accident Lawyer at Jones Law Group

Have you or a loved one been injured in a car accident? Contact an experienced St. Petersburg car accident attorney at Jones Law Group today. When you contact our office we will immediately set an appointment where you will meet your attorney and be provided with his/her personal contact information. If you do not have transportation or you cannot drive, your attorney will travel to meet you and discuss your case with you.

If you or a loved one has been injured in a car accident caused by the negligence of another, you should immediately call an experienced personal injury attorney in St. Petersburg at Jones Law Group at (727) 571-1333 during regular business hours or (727) 753-8657 on weekends or after regular business hours. We will evaluate your case for free and you will never pay us a dime unless we recover compensation for your injuries.

Jones Law Group
5622 Central Avenue
St. Pete, FL 33707

References

[1] http://www.consumerfed.org/pdfs/Studies.ComputerClaims06-04-12.pdf

[2] http://www.postandcourier.com/article/20121202/PC16/121209871/storm-of-money-insider-tells-how-some-insurance-companies-rig-the-system&source=RSS