Critics look for keys to what they deem unfair policy pricing
Insurance industry watchdog Doug Heller was at a birthday party for his mother Sunday when he got an e-mail.
"Documents posted on Allstate’s Web site," came the message to the executive director for Consumer Watchdog, a California-based advocacy group that has championed lower insurance rates in the state.
Word spread quickly in insurance quarters over the weekend after Allstate Corp. on Friday evening posted about 150,000 pages on its Web site that included the long-coveted "McKinsey documents" — reviews prepared by McKinsey & Co., the consulting firm for the Northbrook-based company, as it sought to revamp its claims-handling practices in the 1990s.
Critics of the nation’s biggest publicly traded home and auto insurer for years have tried to get courts to force Allstate to turn over the documents, claiming they hold the secret to what they say is the unfair treatment of policyholders.
McKinsey suggested strategies for Allstate, whose famed motto is "You’re in Good Hands," to lower its claims-processing costs. One slide McKinsey prepared for Allstate was titled "Good Hands or Boxing Gloves," according to evidence presented in one court.
But whether the pages hold mundane corporate strategies or industry bombshells remains to be seen as critics begin the process of poring over the documents "with a fine-tooth comb," one regulator said Monday.
"It’s daunting," said Tom Zutell, a spokesman for the Florida Office of Insurance Regulation, which has been dueling in court with Allstate for months.
"A handful of our legal staff are in possession of the McKinsey report so they will sit down and read page by page and see what they posted," Zutell said.
Allstate’s release of the documents was on the heels of an appeals court ruling in Florida on Friday that upheld the regulator’s suspension in January of the insurer from writing new policies in the state until it complied fully with subpoenas seeking information about how it sets rates. The situation had followed one in Missouri in which the insurer was willing to accept fines rather than submit similar documents to a court.
On Monday, the Florida state regulator said it submitted a motion to the court seeking clarification on whether the suspension could be effective immediately or at the end of a 15-day period.
Meanwhile, Allstate continues to write new business in Florida as it reviews its legal options.
The state of Florida said it will need time to determine whether the documents posted Friday are the ones the agency had been seeking in its subpoena.
"We don’t have a reaction yet because we haven’t reviewed the documents," Zutell said of Allstate’s posting. "Are they actually the McKinsey documents? Are they all the McKinsey documents? We don’t know yet."
Wall Street’s initial take is that Allstate apparently won’t be at a competitive disadvantage. Its stock closed up 1 percent Monday at $49.46.
For years, Allstate refused to make the documents publicly available, calling its actions "respectful civil disobedience" and saying trade secrets were involved.
Allstate said Monday that it didn’t post the documents in response to Friday’s court ruling, noting that it could not have created a site with 150,000 pages that quickly.
"We think the documents do merit protection and what we did to protect them was justified, but at some point you have to look to the threat of the brand," spokesman Rich Halberg said. "Critics were using bits and snippets of documents to create an inaccurate picture of claims."
Heller, of Consumer Watchdog, said his office has only begun reviewing the documents posted.
California’s insurance regulator last month ordered Allstate to cut its automobile insurance rates by 15.9 percent.
"The insurance commissioner found that rates were out of whack," Heller said.
Heller said one of his colleagues began looking at the documents Monday and said he plans to review them too. And "we also have a summer intern who comes in June, and we already have a stack of things for them to analyze," he said "I could imagine [the Allstate pages] being on there too."
He said he felt excited when he received the e-mail that Allstate had posted its McKinsey documents.
"I thought, ‘There are probably a lot of claimants who got cheated who are going to be angry and feel validated,’" he said.
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