“Zero sum economic game.  Allstate gains… others must lose”, is a quote from the Mckinsey documents, recently released on Allstate’s website.  According to a story on the HeraldTribune.com, an appeals court in the State of Florida ruled that Allstate would not be able to write new insurance in the state, if it did not turn over the documents to state investigators.  Allstate officials claim they are releasing the documents to “dispel inacurate portrayals” of the documents in the media and by lawyers and investigators.  Why did Allstate fight tooth and nail to prevent the documents from being released, if they are harmless?  Why did they refuse to comply with a court order, to the point that they were found to be in contempt court for not producing the documents?

Because the documents show Allstate to be taking an adversarial position with their customers.  Allstate gains, others must lose.  In this zero sum analysis, it is the customer who loses.  That is what Allstate wants to prevent from coming out.  In the documents there is a power point presentation that shows a pair of boxing gloves, meant to show that Allstate is putting on the gloves for a fight.  The people they are fighting are those who pay them premiums.  The documents say that when a policyholder hires an attorney, Allstate should “align alligators” and “sit and wait”.  Ouch.  Using their “good hands” to feed their customers to deadly alligators.  Not exactly a great PR move.

Allstate Corporate Spokesman Mike Siemenas said in the article, “we will offer to settle the claim for a fair and reasonable amount” then says in the next breath that when victims get an attorney, “just because we are being threatened doesn’t mean we will negotiate. We will go to trial.”  The act of hiring an attorney is not a threat.  It is something a victim is forced into when Allstate is not being fair with them.  Allstate does not offer to settle for a fair and reasonable amount, either before or after a victim hires an attorney.  The documents show that it is not the act of threatening that keeps Allstate from negotiating fairly, it is the act of being a customer that triggers their refusal to neglotiate.

The article states that Allstate’s profits in 2006 set a record for the company, at $4.9 billion.  Allstate’s profits in 2007 weren’t too bad – $4.6 billion.  Allstate’s Chairman Ed Liddy spoke at a business meeting a couple of years ago, saying “We obviously pay what we owe, that is a given.  But we do it more efficiently, and we avoid overpayments …”. 

Given the information released in the documents, given the fact that Allstate started using a system in the mid-90s that reduced their payments on all claims by 20 percent of the previous average and given their record profits, Liddy’s statement doesn’t ring true.  The documents, coupled with the facts, seem to show they regularly pay less than they owe and are not willing to negotiate with their own policyholders.  This is born out by the fact that Allstate has been sanctioned in South Carolina and Virginia for these practices.  Additionally Allstate has been sued for bad faith by numerous policyholders, including a man who received a $20 million verdict against Allstate in 2006.   The following note posted on a Yahoo message board sums up Allstate’s “good hands” approach:

I am posting below a note I got in just today from a former agent who had to use the product he sold………..to himself:

“I retired from Allstate in 2000, still insured by Allstate and involved in a major auto accident just over 3 years ago. A piece of equipment came off a commercial vehicle hit us and totaled our vehicle (truck and travel trailer property damage $55,000+) and caused my wife and I injuries which we will live with for the rest of our lives. The physical pain we suffer from back injuries is contant and always with us. My personal Allstate insurance policy included coverage for $100,000 medical payments which I believed would take care of all of our needs. Was I wrong!!! We have fought Allstate, our personal auto insurance company, from the very beginning to get our medical needs taken care of. Our claims office acted like they were working for the other insurance company and not us. After 12 months of limited care they refused to reimburse me or pay for any further care for me (my medical paid was something near $15,000). After 2 years they limited my wifes what they would pay for my wife’s care (her medical was near $45,000). What is so amazing is that they based their refusal on an examination conducted by a chiropractor (I.M.E. ordered by Allstate) completed 6 months after the accident.  That is our horror story of how well Allstate takes care of their own, both as an insured and as a retired agent.”