WASHINGTON--Claims handling software being marketed to insurers is creating a system where underwriters profit by unfairly reducing customers' claims payments, a consumer insurance expert said today.
J. Robert Hunter, Consumer Federation of America director of insurance, speaking at the CFA's financial services conference here, said that such software is often marketed to insurers as capable of providing immediate cost savings. In fact, he added, they "are designed to systematically underpay" the claimant.
As evidence to the problem, Mr. Hunter noted that the amount of money being paid by insurers relative to claims has decreased significantly. In 1987, he said, insurers paid roughly 75 cents for each premium dollar they collected. Today, he said that number has decreased to 65 cents and appears to be headed further downward.
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