Only a few years ago auto insurance companies were setting up huge call centers to reach their customers quicker. Now the trend is online operations. Nearly all insurers have online car insurance quotes available to their visitors on their official websites. Policyholders can print or download their policy documents. Electronic proof of insurance is becoming common place as well.
Making claims online is only one part of the electronic operations for some companies. They now use computer programs to even determine the pay-out to claimants. A widely used program is called Colossus. It determines the personal injury settlements for various companies.
The program first gathers a large sample of previously closed cases. From there it can device a formula to pay new claims based on the previous amount paid to certain types of claims and injuries. Under normal circumstances this system should speed up the decision making and claim payment process and therefore should be good for both carriers and claimants.
However the Consumer Federation of America (CFA) report suggests that the injured parties may not be getting a fair deal with computerized claim handling. They agree that the program may be the right step forward as it is much cheaper and faster for the companies to handle the claims. Hopefully that results in lower rates for the future due to cost savings.
The report highlights the possibility that insurers can fine tune the Colossus program to increase their profitability by reducing bodily injury liability claims. The researchers are convinced that the software can be adjusted and the result manipulated.
As mentioned above Colossus is integrated into their claim handling operation. The software is allowed to sample a good selection of claims and comes up with average payment for variety of situations. If the companies are selective on the samples fed to the program they can manipulate it to deliver lower figures all the time. This can be achieved by taking out the most expensive settlements and leaving the cheaper ones. The program then would automatically come up with lower averages.
Also, companies are still in full control on the final settlements. They may decide to intervene and re-assess the suggested figures if they were found to high. Essentially the argument is about either allowing the software to achieve its objectives independently or never use it if insurers will keep fiddling on it and its results. The report points out that properly fine-tuned Colossus program can produce accurate results. It can assess the claims and determine a fair settlement if it was used as it is meant to.
The suggested solution according to CFA is the National Association of Insurance Commissioners (NAIC) closely examines the usage of Colossus. Also, companies are urged to share the information that they are letting software to determine the outcome of their claims.
Another problem can be that the companies can be arrogant about the correctness of the settlement since it is done by a computer. However that can be the exact reason for the objections of claimants. They may feel that some human side of their sufferings has not been taken into account. If this bothers you that a computer will decide on your claims you should perhaps check with your insurer if this is the case with the particular company.