Software Problems

By Author: Marcus Stalder
Total Articles: 491
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Of course, we can never feel sorry for insurance companies. They have been in a protected position for so long, even the bigger setbacks are less of a problem for them than other industries. Take this recession as a classic example. All the major financial players have suffered, whether banks, credit card carriers or lenders. But with the exception of AIG that was caught up in insuring the banks, all the insurance companies have been continuously profitable. This despite the twin attacks of rising medical and repair costs, and more people deciding to manage uninsured. One of the ways in which they have coped is by shedding staff in favor of automated systems. Indeed, many companies are now offering online insurance in which all the major transactions are through the website. This has enabled these companies to make significant staffing reductions and pass these on to the customers in lower premiums. There's just one problem. The moment you start replacing people with software, everything works well so long as everyone stays within the programmed system. But once you have an issue not predicted when the software was designed, ...
... you have to wait for a human being to come along and deal with it. This leads to delays and second-best service. Many people accept this as a part of the package leading to lower premiums.

But new concerns have been raised by the Consumer Federation of America (CFA) about some software called Colossus and similar packages used to decide how much to pay on claims for physical injuries. This covers all those difficult to value elements like damages for pain and suffering which vary from state to state, with local courts differing in awards of damages. In theory, this is a great system. It stores tens of thousands of case reports and details of negotiated settlements, sorting them based on the type and severity of the injuries. So, if you wanted to know the average payment for a broken arms in Arizona, you have the answer in seconds. But equally, the system can be used to produce high or low averages. If an insurer wanted to save on costs, it could change the program to low-ball offers of settlement. Or it could eliminate some of the factors from your individual circumstances used to produce an overall settlement, e.g. how much you have lost in wages, what additional expenses have been forced because of your injuries, and so on.

Of course, human claims adjusters will look at each offer produced by the software, but most are given bonuses if they settle at these average figures. So if you are unlucky and have been injured, ask how the offer of settlement has been calculated. If software like Colossus is being used, insist on seeing a summary of the full range of settlements and always insist on an offer at the high end. If the auto insurance company refuses to answer, make a complaint to your local Insurance Commissioner. It may also be in your interests to take legal advice. Always remember the auto insurance industry is not a charity and it will try to persuade you to accept the lowest possible offer of settlement, no matter how serious your injuries.