Insurer resists pressure over document that is said to focus on claim payouts
By JOHN HIELSCHER
john.hielscher@heraldtribune.com
The unprecedented standoff between Allstate and Florida's insurance regulators has zeroed in on a secret consultant's report.
That document, according to the regulators, is a blueprint for how Allstate boosts profits by paying less on policyholders' claims.
Allstate is so protective of what it considers a trade secret that it is willing to defy investigative subpoenas issued by the Florida Office of Insurance Regulation, or OIR.
The office filed a formal order Thursday suspending Allstate from writing new insurance policies in Florida until it complies with those subpoenas.
That order was expanded to stop Allstate's 1,100 agents from selling any new policies, including property coverage.
The state had initially planned to block only sales of new auto policies, a lucrative business that generated $1.8 billion in premiums for Allstate in 2006.
It is the first time the state has suspended an insurance company for refusing to provide information.
The OIR order revealed that regulators are seeking, among other documents, a report prepared by McKinsey & Co., a New York consultant.
Allstate in 1992 adopted the "claims core process redesign" recommended by McKinsey, a system designed to turn the business of claims into a "zero sum game," the order states.
Allstate uses a program that promised to cut bodily injury claims by up to 20 percent by reducing payments to policyholders "without adequately examining the validity of each individual claim."
"Such improper claims-handling practices are harmful to Allstate's customers in Florida and are a continuing direct violation of Florida's Unfair Insurance Trade Practices Act," the order states.
Allstate officials did not return calls Thursday to comment on the order.
In a statement Wednesday, the company said it provided nearly 40,000 pages of information to the state and would continue to produce "responsive documents."
Allstate guards the McKinsey report so closely that it has paid a Missouri court contempt fines totaling $2.4 million -- $25,000 a day -- rather than release it.
Florida Insurance Commissioner Kevin McCarty says that is why he chose to suspend Allstate from writing new business rather than fining it.
The subpoenas were issued in connection with hearings that were to focus on Allstate's request for up to 42 percent in rate increases for property insurance.
The state is looking into why Allstate wants a rate increase when companies are supposed to be lowering prices this year.
McCarty angrily ended the hearings Tuesday after Allstate refused to produce all the documents he wanted.
Consumer advocate Bill Newton lauds McCarty for getting tough with Allstate.
"We think it's awesome; he is absolutely on the right track here," said Newton, executive director of the Tampa-based Florida Consumer Action Network.
He says McCarty is a stronger insurance commissioner because of the insurance reform law passed last year. That law stopped insurers from implementing rate increases before they were approved and eliminated arbitration panels for rate-increase appeals.
Joseph Annotti, spokesman for the Property Casualty Insurers Association of America, thinks McCarty's stand could hurt Florida's insurance business. "We understand that consumers are frustrated, and we understand public policy makers have to respond to consumers needs," he said. "But I just don't think that kind of contentiousness does anything to get us any closer to a solution that makes buildings stronger, people safer and the market more stable."
Gov. Charlie Crist on Thursday blasted Allstate in a rare show of political anger directed at a private company.
He said policyholders should "fire Allstate."
"They're not doing any great service in my view to the consumers and citizens," Crist said. "I don't know why you would want to keep them. They charge incredibly high rates, they're withholding documents, they seem to be handling themselves in a way that is beyond inappropriate."
Crist showed little concern for Allstate's agents who may suffer financially if they cannot write new business.
"It's too bad they work for such a bad company," he said.
Staff writer Joe Follick contributed to this report.
Last modified: January 18. 2008 1:38AM
The unprecedented standoff between Allstate and Florida's insurance regulators has zeroed in on a secret consultant's report.That document, according to the regulators, is a blueprint for how . . .
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