12/2/2012, Insider tells how some insurance companies rig the system


In 2009, led by New York and Illinois, state insurance regulators began the first multi-state examination of how an insurance company uses a software tool to handle claims…

“A part of this story is the failure of state insurance regulators to police insurance companies’ conduct,” added Jay Feinman, a law professor at Rutgers University and author of “Delay, Deny, Defend,” a book that says insurers try to avoid paying claims.

Robert Hunter, a director with the Consumer Federation of America, was blunter: “It was weak.” If the investigation was so thorough, he asked aloud, why had the regulators failed to talk with Allstate’s official Colossus expert, Mark Romano?

These black boxes have a significant impact on what people in South Carolina receive for their claims, but state insurance regulators have no plans to study Colossus or other claim handling programs. They say they leave such analyses to states where insurance companies are based. Overall, said Robert Hartwig of the Insurance Information Institute, “these issues are dead and buried, and regulators don’t pay much attention to it. The fact of the matter, they’re satisfied with the methodologies and constantly review the models.” Twenty percent of the top 30 U.S. insurers, including Allstate, use Colossus today…

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