The federation recommended that software companies be better monitored. It would like the National Association of Insurance Commissioners and state regulators to investigate methods used by large insurers "to directly or indirectly reduce claims payouts in an illegitimate manner."
Consumers should be notified in writing when a computerized claims assessment is used to process their claim, the federation said.
The National Association of Insurance Commissioners replied, "Computerized claims systems, such as Colossus, are generally geared for use in the claims settlement portion that involves pain and suffering, which can be a very subjective process. It is the expectation of state insurance regulators that these systems are just one factor in helping a claim representative reach a settlement conclusion.
"States monitor the settlement of claims through the Unfair Claims Settlement Practices Laws, which provide consumers with specific protections," the association continued in a written statement. "For example, the Unfair Claims Settlement Practices Act of the NAIC prohibits an insurer from (1) failing to adopt and implement reasonable standards for the prompt investigation and settlement of claims; (2) not attempting in good faith to effectuate prompt, fair and equitable settlement of claims in which liability has become reasonably clear; (3) compelling insureds or beneficiaries to institute suits to recover amounts due under its policies by offering substantially less than the amounts ultimately recovered in suits brought by them; and (4) refusing to pay claims without conducting a reasonable investigation."
-Karen DeMasters