The examination found some breakdowns when it came to management and oversight of the software program regarding the payment of bodily-injury claims, Nachman added. Specifically, Allstate's use of Colossus did not always "account for regional discrepancies" and did not reflect recently-settled claims, he said.

Nachman said Allstate agreed to notify claimants when Colossus may be used, enhance oversight of the program, strengthen internal auditing of Colossus and make it clear to adjusters that they do not have to settle claims based solely on what Colossus recommends.

"As a concept, there is nothing wrong with using this software. You just have to do it right," Nachman said.

New York's share of the $10 million will be $1.2 million. Allstate will also pay the state and the three other lead states in the examination--Florida, Iowa and Illinois--$50,000 each for expenses related to the examination.

Forty-one other states have signed on to share the $10 million education fund, which will be distributed based on market share. If states can earmark the funds for a specific purpose, it will be used for education. Otherwise it will go into the insurance department's general fund. It remains unclear whether New York can earmark the money, said Jared Wilner, assistant counsel.

Allstate said the agreement states insurance department personnel need better training about claims-handling technology and its uses.