Allstate Banned from Writing New Policies in Florida
In yet another showdown with state governments, Allstate Insurance Company has been banned from issuing new policies of any type of insurance by the Office of Insurance Regulation (OIR). This showdown follows court cases in Kentucky and Missouri, and, like those cases, it hinges on a set of documents known as the McKinsey report. Unlike those cases, it is the first time a state government has launched something of a pre-emptive strike against the insurer, rather than waiting for bad-faith insurance claims to come forward. The OIR has stated it believes Allstate is cheating its policyholders in direct violation of the Florida’s Unfair Insurance Trade Practices Act.
The McKinsey report is a set of documents prepared by the New York consulting firm McKinsey & Co, and it details a method for reducing payments to policyholders, regardless of the merit of the claim. The goal, according to leaked portions of the document, was to delay payment, especially for auto accident claims, in the hope that frustrated policyholders would simply give up their claim, then, if the policyholder was tenacious enough, make an offer based on its database of projected costs for injuries, rather than actual reported costs. If anyone doesn’t take the payment, seeking perhaps the full level of coverage spelled out in the policy, Allstate was to fight the claim with everything it had.
Allstate has always claimed that these portions of the report were taken out of context, and that they do not reflect the essence of Allstate’s claims handling process, and are not responsible for the company posting record profits since the principles were used as part of the “claims core process redesign.” The problem is, Allstate doesn’t want to share the whole document.
In fact, the company is so resistant to sharing the document, it is paying $25,000 a day rather than reveal it. And now it is resisting a subpoena from the OIR, despite its suspension of new policies.
The OIR is asking for the documents because Allstate is requesting a rate increase of as much as 42%, despite prior indications that rates were supposed to be going down this year.