Travelers methods deny legitimate benefits
David Berardinelli’s book, From Good Hands to Boxing Gloves, highlights management consultant McKinsey & Co. attempt to reengineer auto insurance claims operations.
Allstate’s went to court to keep Berardinelli from publishing this book. Didn’t work.
McKinsey suggested that Allstate should treat some of its claimants with “boxing gloves,” rather than with its trademark “good hands.” I think we see the beginning of that process with my claim and with Mr. Marsh.
Paying the minimum necessary — and it playing hardball with those who seek more is standard procedure.
McKinsey has also done work for Farmers Insurance Group, USAA, State Farm, and Fireman’s Fund.
The McKinsey project, which lasted from 1992 until at least 1997, institutionalized aggressive practices aimed at enriching investors at the expense of customers.
In the decade after Allstate instituted the McKinsey program in 1995, the amount of money it paid out per premium dollar in car accident cases declined from about 63 cents to 47 cents, according to A.M. Best.
One McKinsey slide indicates the insurer has been“extremely successful in reducing severities with reductions in the range of 20% for Colossus-evaluated claims.”
The boxing gloves slide was displayed in open court in a case against Allstate in Kentucky last year. It states that by “holding the line” on cases where accident victims hire lawyers, Allstate could achieve “a new distribution of settlement times” on subjective-injury claims. “By increasing the number of early unrepresented settlements,” the slide says, Allstate could give 90% of these claims the “good hands” treatment, resolving them within about 200 days. But the slide shows the remaining 10% getting “boxing gloves” treatment, and a graph shows resolution of their claims taking as much as four years or longer.
In Berardinelli’s view, this slide reflects what he sees as the current practice at Allstate. Claimants in the “good hands” category may get swift reimbursement, but they will end up with less than they’re entitled to, he says. Those who hold out for more — and retain a lawyer to help them get it — face battering in the courts and potentially years of delay. “You can get your claims resolved promptly or fairly,” he argues, “but not both.” Allstate says some people hired lawyers because they were not familiar with the claims process.
Once the CCPR program was rolled out in 1995, the effect was quickly felt by the trial bar. “We would ordinarily settle one or two cases a month,” recalls Whitney Buchanan, a plaintiffs’ attorney in Albuquerque. But then, “Allstate simply turned off the taps.”
McKinsey’s Five-Step Program
In one of its presentations to Allstate, the management consultant predicted that Allstate could reduce auto payouts by 5% to 15% and expenses by 10% to 20% if managers took the following steps:
1 GETTING BEHIND THE PROGRAM
“The senior management team views the improvement program as a top priority.”
2 ELIMINATING SACRED COWS
“They are willing to make fundamental changes in people, procedures, management systems, structure.”
3 BEING IN FOR THE LONG HAUL
“They stick with it for several years until a changed culture is put in place.”
4 SPREADING THE WORD
“They focus extraordinary attention on communication throughout the organization.”
5 MEASURING THE RESULTS
“They invest significant time in measuring their performance.”
Legal Affairs: Car Insurance
In Tough Hands At Allstate; It’s fighting accusations that its methods deny policyholders legitimate benefits
By Michael Orey
2265 words
1 May 2006
48
Volume 3982
English
(c) 2006 McGraw-Hill, Inc.
