Blog Post
You're in "good hands."
Posted by: Spencer Pahlke
April 28, 2008
Topic: Insurance Bad Faith
This is classic. Though you may have thought that you're in "good hands with Allstate," it actually turns out that those "good hands" are more like boxing gloves. The Chicago Tribune, along with many other sources, have reported that Allstate is finally release thousands of documents related to a late 90s report done by McKinsey & Co.
In the 90s, Allstate searched for ways to "revamp" its claims handling process. Of course, I assume "revamp" means "save Allstate money," which would be done by denying more meritorious claims. Sure enough, as reported in the Sarasota Herald-Tribune (more on why Florida's in the middle of this in second), Allstate used this strategy to drop its insurance payments by 20%, increase its revenue to $4.9 billion in 2006 and, of course, double the size of its legal department.
To line its pockets with this kind of cash, Allstate used a program--made by McKinsey & Co--called "Colossus." The program provided "fair" values for claims, which Allstate agents then pushed off on unsuspecting, injured people trying to recover insurance proceeds that were rightly their's. And, when injured people did not fall in, they were subjected to years of litigation. The result? The aforementioned profits, along with a reputation among plaintiff's attorneys as being an obstinate opponent.
The Colossus program and the other methods suggested by McKinsey & Co are in some 160,000 pages of documents that Allstate recently made public in Florida. For several years, injured people and their attorneys had been seeking the papers and, for years, Allstate insisted that only a fraction of the 160,000 existed. Finally a Court of Appeal in Florida which suspended Allstate's insurance writing powers in the state until it turned over the documents. Only under that pressure--Florida accounted for 17% of Allstate's sales--did the company turn over the documents. Now that's what I call "good hands."
These cases are called "bad faith cases," because they involve unreasonable conduct on the part of one's insurer. Depending on the policy of insurance, insurance companies are contractually bound to make insurance payments when a given circumstance arises--when a person is injured by an uninsured or underinsured motorist or when one is permanently disabled, for instance. Of course, as Allstate proved, insurance companies are sometimes loathe to make the payments they originally promised to make. At Walkup, we handle these insurance bad faith cases.
