NAIC Raps Allstate for Software-Related Claims Handling Inconsistencies

A settlement between Allstate and the National Association of Insurance Commissioners (NAIC) serves as a reminder of the importance of consistent, standardized processes across the enterprise, and also that, ultimately, the quality of computer processing output is only as good as the input.

According to an Insurance Journal report, Allstate has agreed to pay $10 million to 45 states as the result of findings from an NAIC investigation that focused on the carrier's use of CSC's Colossus software for bodily injury claims following automobile accidents:

The examination found inconsistencies in Allstate's oversight of the Colossus software program. In particular, the examination found that Allstate had failed to modify or "tune" the software in a uniform and consistent manner across its claims handling regions.

As reported by Insurance Journal the NAIC absolved Allstate of any systemic underpayment of claims but insisted on changes to the carrier's claims handling process, many of which focus on use of the Colossus software application:

• Providing notice to claimants that the Colossus software program may be used in the adjustment of their bodily injury claims;

• Enhancing its management oversight of Colossus to ensure that it adheres to established criteria and a uniform methodology in selecting claims to be used to "tune" or modify the software to reflect recently settled claims;

• Strengthening its internal auditing of Colossus and bodily injury claims handling to ensure adherence to written guidelines and procedures;

• Consolidating its bodily injury claims handling practices into a single claims handling manual; and

• Not establishing a policy or rule requiring claims adjusters to settle bodily injury claims solely on the value recommended by Colossus and not providing incentives for claims adjusters to settle claims at or near the value recommended by Colossus.

Colossus became a CSC product as a result of the vendor's acquisition of Austin, Texas-based Continuum in 1996.

Anthony O'Donnell has covered technology in the insurance industry since 2000, when he joined the editorial staff of Insurance & Technology. As an editor and reporter for I&T and the InformationWeek Financial Services of TechWeb he has written on all areas of information ... View Full Bio