Most major insurers use software programs to calculate the insurer’s settlement value of small to medium size injury claims. Originally developed in Australia, the software was brought to this country and given the name Colossus. Allstate Insurance Company licensed Colossus in the early 1990’s. Allstate’s stated purpose was to standardize claims valuation practices. The real aim was to reduce claims paid. Aetna, Allstate, CNA, Farmers, The Hartford, MetLife, Travelers, USAA and Zurich are a few of the companies known to use Colossus. After Allstate had spectacular success reducing claims payouts, two other products came on-line and are used by some other companies. For our purposes, we generally refer to all such programs as “Colossus”. Not surprisingly, the insurers have kept a tight lid on information about the system. However, information has leaked out from whistle-blowers and adjusters who have left the insurers.
Under Colossus, adjusters enter medical information into the system. It analyzes the claim and assigns “trauma severity points” to the injuries. Once the claim is scored, Colossus calculates a value range for the damages based on a dollar amount built into the program for each severity point. The system assigns a dollar value for each trauma severity point using 600 injury codes. Colossus ignores the fact that there are over 12,000 codes used by healthcare providers to classify injuries.
The system also considers the history of the lawyer involved as to whether he/she settles his/her claims or has been proven to pursue them through litigation, as well as the jurisdiction where the claim would have to be tried. No significant history of a lawyer trying his/her cases means a low-ball offer. A very conservative jurisdiction moves the value down. Finally, the system allows input as to basic information about the claimant, including age, sex, education, employment, etc., all of which tend to impact verdicts in reasonably predictable ways.
Colossus was initially billed as an even-handed method of handling claims, based upon historical averages for the types of injuries and other factors mentioned above. Supposedly only a guide to evaluating claims, a Colossus evaluation can often be the end point of a claims evaluation. Problems arise, of course, if the information is improperly inputted into, or left out of, the software program (adjuster error) or information is missing (claimant or attorney error).
Colossus ascribes greater value to objective, easily verified injuries (e.g. fractures and herniated disks). Soft tissue injuries (which include not only strains and sprains, but also injuries to the muscles and nervous system not as readily verifiable) receive lower valuations. The following is a partial list of medical findings which may increase the value of a Colossus claim:
- Muscle spasm
- Radiating pain
- Restriction of motion
- Depression and anxiety
- Vision impairment
It is critical that a claimant suffering from any of these symptoms report them to the doctor. If symptoms aren’t documented in the medical records and, especially if they are not treated, then they don’t exist from the perspective of Colossus.
A Colossus valuation increases measurably for hospitalization, especially if the claimant was taken to the hospital after the accident and more so if the patient was kept in the hospital overnight. A longer hospitalization results in a higher valuation. Not going to the hospital or not promptly seeking medical treatment downgrades the value of the claim.
Delays and gaps in treatment can totally skew a Colossus valuation. Delays in treatment of more than a day or two raise a red flag in the system. Delays of initial treatment following an accident for a period of a week may raise a question of fraud in soft tissue injury cases. Delays of up to a month are presumed fraudulent. As a result, any delay in treatment must be explained to the physician who must enter the reason for the delay in the medical record.
Chiropractors, in particular, receive special attention from Colossus since they typically treat minor and moderate soft tissue injuries. The system only recognizes certain diagnoses from chiropractors, including neck and back strains or sprains. More sophisticated chiropractic diagnoses are simply ignored. Treatment rendered by medical specialists get a higher value than treatment rendered by general practitioners.
Another factor taken into consideration by Colossus is the length of treatment. If treatments by a chiropractor exceed 20-25 visits, the system is designed to either ignore or devalue any further treatment. Physical therapy, massage therapy, and acupuncture are generally treated the same by the system, but again must be accurately documented. Ninety days of physical therapy receives credit for up to three months of therapy, while treatments beyond 90 days generally are credited with 3-6 months treatment. The difference changes the evaluation.
Prescription medications are considered by the system. It is important, however, that the type, dosage, and frequency of administering the medication be accurately documented.
Finally, an impairment rating from a treating physician can be a very important factor in Colossus evaluations. Unfortunately, most physicians aren’t familiar with the American Medical Association’s “Guides to the Evaluation of Permanent Impairment” (which is what Colossus responds to) and are either unwilling or incapable of stating the percentage or degree of impairment caused by a particular accident. In the appropriate case, it may be worthwhile to have an independent medical evaluator examine the claimant and render an opinion as to the effect of the accident in causing the injury, as well as the nature of the injury and the percentage or degree of permanent impairment.
There are considerable shortfalls in the design of Colossus which inadequately addresses past and future medical bills, lost wages, or even a loss of future earnings capacity resulting from an injury. Colossus does not take into consideration pain and suffering, scarring, and emotional damage, which are often major components of a claim.
Probably the worst thing about Colossus, however, is the deliberate manipulation of its values by some insurers to drive down claims. The software company promised, in its sales literature, that Colossus would immediately reduce the costs of bodily injury claims by up to 20%. In reality, the program (as it was used or abused) worked even better, allowing Allstate alone to reduce the amount it paid out per premium dollar in auto cases from 63 cents to 47 cents of each premium dollar between 1995 and 2005. What happened is that Allstate’s claims people controlled the information fed into Colossus to reduce severity points by only putting in very low values as reflecting the average. Allstate provided rewards to adjusters who settled claims for less than even the low end of values. It punished adjusters who settled for more than the mid- to upper end of the Colossus values. Eventually, whistleblowers got the attention of State Attorney Generals who went after Allstate, Farmers and several other egregious offenders. The insurers signed consent agreements and paid fines, but profited so enormously that the “punishment” was simply a minor cost of doing business when compared to how much the insurers made by uniformly manipulating the claims. Today, no one can know for certain, from state-to-state, how Colossus is used or modified by specific insurers.