09
Apr
ALLSTATE INSURANCE COMPANY : ARE YOU IN GOOD HANDS?
Allstate Insurance Company trumpets that it has a “commitment to strong principles and the highest ethical standards”. Everyone is familiar with its mantra: “You’re in Good Hands with Allstate”. An expose on the claims practices of Allstate Insurance Company authored by respected journalist, Paige St. John published on April 6, 2008 in Florida’s Sarasota Herald Tribune critically examined corporate documents of the insurer which revealed claims strategies that promoted corporate profits at the expense of the carrier’s policy holders. The article, “How a get-tough policy lifted Allstate’s profits” can be found at:
http://www.heraldtribune.com/article/20080406/804060659/1661
According to Paige St. John, “For more than a decade, Allstate Insurance Company kept a secret from its auto policyholders- a national strategy to force customers to accept reduced cash payouts or face years in court”. The article critically examined a previously secret treasure trove of 12,000 documents that revealed “how the nation’s second-largest insurer systematically cut payments” to insured’s “as a way to boost profits”.
According to the article, the two components of the Allstate strategy included:
-Use of its own adaptation of a software package known as “Colossus” to lower payouts for bodily injuries by more than 20%
-Pressure on its claimants “to accept quick settlement without the help of lawyers”. “Policyholders who try to fight for more money face Allstate attorneys coached to refuse to negotiate and to drag out litigation”.
The article indicates that Allstate hired a consultant, McKinsey & Co. to formulate strategies to foster success. In PowerPoint presentations and discussion papers drawn up for Allstate executives, McKinsey used “boxing gloves” to characterize how Allstate should treat policyholders who balk at settlements. For customers who hired lawyers, McKinsey urged, “align alligators, adding these instruction: “sit and wait”.
PowerPoint slides also show the consultants advised the company to convince their insureds that they did not need lawyers and then to target those who disregarded that advice for denials, delays and litigation. Another slide purportedly urged it client to “Win by exploiting the economics of the practice of law”. The article quotes a former Allstate lawyer, Robert Healy, stating that “They put pressure on people by establishing that they are a bully in the market”.
Allstate was sanctioned by different courts for failing to provide these documents in litigation. After considerable publicity about these documents, Allstate released some of the documents on its website:
http:/media.allstate.com/releases/4395-allstate-acts-to-dispel
Allstate has produced record profits of 4.9 billion in 2006 and 4.6 billion in 2007.