CNN Money Cites Trial Guides' From Good Hands to Boxing Gloves

Allstate Insurance Good Hands

Think You're Insured? Maybe Not.

That is the title of a new article by CNN Money magazine discussing insurance claim practices. The basis for the article is Trial Guides' book From Good Hands to Boxing Gloves.  

The article cites improper insurance claim denials in everything from health insurance claims, disability claims, to hurricane damage claims, to auto injury claims.  The article notes that despite increasing improper claim denials and significant increases in customer complaints "Big public health carriers have been posting 20%-plus gains in earnings, and property/casualty companies (which cover, for example, autos and homes) are more profitable than ever."  The article notes "A study this January by Robert Hunter, a former insurance commissioner of Texas, now the insurance director of the Consumer Federation of America, shows that property/casualty insurers are paying out less in claims relative to the premiums they collect than at any time in the past 20 years."

Trial Guides author David Berardinelli is mentioned prominently by CNN and Money Magazine regarding Allstate Insurance's claim handling method called Claims Core Process Redesign ("CCPR").  

The article notes "Berardinelli is the author of From Good Hands to Boxing Gloves, a book based on some 12,500 PowerPoint slides that [he obtained] during a lawsuit against Allstate Insurance Co. The slides had been presented to Allstate between 1992 and 1997 by management consultant McKinsey & Co. as part of an overhaul (the Claim Core Process Redesign) of the insurer's claims handling process.

Much of the presentation encourages Allstate to adopt a hard-nosed approach to claims. One typical slide picked from the book refers to taking a stricter stance on settlements: 'Stand firm on final offer with no real negotiation.' Another—and the inspiration for the book's title—distinguishes between the treatment to be accorded to customers who hire a lawyer to press for a higher payout and those who don't: The unrepresented get the "good hands" approach (settlements within 200 days or so); the lawyered get "boxing gloves" (resolution that could take three years or longer). Think of it as the Oliver Twist strategy: Accept the company's initial offer (which may seem more fair to Allstate than it seems to you ) and you'll get your money quickly. Ask for more and you may be in for a battle. And while the slides specifically deal with Allstate's auto division, Berardinelli and others familiar with the project contend the concept was applied to homeowners as well."

The magazine confirmed this with one of Allstate's own adjustors;

"The strategy outlined in the slides sounds much like the marching orders Shannon Brady Kmatz says she got when she was an Allstate claims adjuster. Kmatz, who left Allstate in 2000, says she felt under constant pressure to "fast-track" claims—that is, settle quickly for as little as possible. "We called it throwing them a bone," she said. "You offer $500 and hope they go away." She said she was also evaluated on how successful she was at convincing people to accept the company's offer rather than try to get more money by hiring an attorney. Adjusters who excelled at these goals, Kmatz says, were rewarded with free dinners and bonuses that could add up to a few thousand dollars a year. Kmatz provided evidence of such bonuses in a 2003 affidavit that is part of a class-action suit Berardinelli has filed against Allstate, and MONEY has reviewed those documents."

Leading insurance claims practice expert Gary Fye is also quoted regarding the impact of McKinsey and Accenture's consulting with State Farm Insurance, Allstate Insurance and Farmers' Insurance to cut claim payments. "Gary Fye, a claims consultant familiar with all three companies, agrees. 'These practices continue today,' he says."  

"One thing is not in dispute: All three insurers have made startling progress in lowering their claims payout ratios since they engaged the consultants. At Allstate, claims paid fell from 87.2% of premiums charged in 1992 to 43.5% last year, according to the CFA's Hunter. At State Farm the ratio dropped from 77.5% in 1994 to 66.6% in 2005 (the most recent figure available), while at Farmers it fell from 74.7% in 2001 to 56.9%."  That is a dramatic drop from the historical payout of 70% of premium dollars being paid out in claims.

New Mexico lawyer, David Berardinelli, is the primary author of Trial Guides' book From Good Hands to Boxing Gloves. He is the first lawyer to obtain the "McKinsey Documents" created by McKinsey & Co. in their design of Allstate's CCPR claims handling method.  The  book details how McKinsey helped Allstate change from treating its policyholders with "Good Hands" to "Boxing Gloves" to increase Allstate executive bonuses and stock prices.

Follow the link to read the full story in Money magazine.