Everyone has heard about "frivolous
lawsuits" yet the other side of the coin seems to get little press. When
I say other side of the coin, I am referring to the frivolous defenses and
abusive claims handling practices utilized by many car insurance companies in
the state of Texas.
Texas seems to be leading the charge in allowing
insurance companies to abuse their policyholders and the public at large by
failing to regulate claims handling practices. While the initial
reasoning for "tort reform" made a lot of sense to most of us, the
reality has been quite different and the consumer has been left holding the bag
in the state of Texas.
One of the ways that the insurance companies have
sought to keep the value of personal injuries down is by using a computer
program to "value" the individual claims of the public. What is less
known is the fact that the programs used by these insurers can be manipulated
basically by what is put into the system.
It seems to me that carriers work very hard to
settle cases where the factors are ripe for a large jury verdict and force the
smaller cases to be litigated at the expense of the victim. Texas has
compounded the matter by allowing in-house employees of the insurance company
to actually defend their insured, basically ignoring the inherent conflict of
Everyone’s body is different and as many injuries
as we see over time, each person is unique in their age, physical makeup and
their ability to heal. Using a computer system with the information
inputted by the insurance company is a method that results in forcing cases to trial for
many smaller claims.
Some states have expressed displeasure with the
computer program determining the reasonable value of claims for consumers
within their states. Insisting that the human adjuster make the final call.
The reality is that when major claims can be pulled
out of the programming or not added to the value of claims actually paid out,
the result of these computer programs are not representative of the true value
of the claims. Only by adding all settlements and verdicts into the system can
a computer program come close to representing real value in a case and even then it is unfair to many.
Many attorneys on the other side of the fence suggest
that using a computer program can show "good faith" in the claims
handling practices. Only upon full disclosure of the actual processes and uses of
the system can such a determination really be made.
There’s little doubt that the cost of litigation is
factored into the equation for smaller claims forcing victims who cannot find
attorneys to represent them to suffer lowball settlements.
There are other attorneys that suggest that the
process used by many insurance companies is to input the lower value claims
into the system, which results in lower overall values of settlement ranges
because the higher value claims are not in the program.
The "old garbage in, garbage out" argument seems to
be especially relevant to computer programs designed to "value" a
personal injury victim’s individual claim. Individual personal injury victims
who are handling their own claims may consider asking the adjuster for the
results of the computer driven valuation once they learn a computer system is
When states decide to put consumers ahead of the insurance
lobby, they require the insurers to pay out a specific percentage of their
premiums collected toward actual claims. This serves to ensure fairness in the
claims handling practices and also more importantly, keeps the premiums down
for the consumers within the state.
Allowing insurance carriers to abuse claims
handling practices in order to keep their bottom line shiny, results in
overpriced insurance policies and dissatisfied policyholders when a claim is
made. The computer aided settlement system is just a part of the bigger
The use of computer programs to value personal injury claims has tended to reduce the value of claims and increase profits for insurance companies while leaving consumers dissatisfied.
Insurance reform should include requiring an auto insurer to pay out in claims a specific percentage of the premiums collected, which serves to decrease the cost of insurance policies in the state and also increase consumer satisfaction.
Greg Baumgartner is the founder of the <a href=>Baumgartner Law Firm</a> in Houston, Texas and an avid safety and consumer advocate.