The McKinsey Slides

This is a long story, It began ten years ago when many insurance company executives got together in person and by different means of trade communications  and decided the industry was making record profits, but not making profits to equal the fortune 500 companies.  Two of these companies hired the worlds largest consulting firm called Mckinsey & Company to figure a way to increase profits even more.  Three years later they came back with the solution, which was to raise profits by cutting back claims payments. This was a very complex scheme of which one component was a set of twelve thousand slide presentations, and thirteen thousand pages.   To acomplish this scheme the insurance industry would create a new ethical concept which included putting the interest of company profits ahead of their traditional policyholders interest.  To create this new concept all insurance companies united in a policy of retraining and educating all their employes.  After all, for this new concept to work all companies had to follow along.  And follow along they did.  Farm Bureaus corporate performance, and ethical conduct  from then on was measured by only one standard, profit.  Farm Bureau and the entire insurance industry totally wiped out the traditional fiduciary duty inherent in the insurance industry's obligation to policyholders as expressed by the California Supreme Court 30 years ago. It stated "The obligations of good faith and fair dealing encompass qualities of decency and humanity inherent in the responsibilities of a fiduciary."  After implementing this new concept, total insurance company operating income increased by over 3000 percent. Yes, thats three thousand percent.  For this to happen there had to be a lot of serious cheating with unfair claims practices.  Missouri Farm Bureau leads the pack in this effort.  The 200 plus lawsuits with policyholders since August of 2003 prove this out.  Some of the tactics instigated by McKinsey, and used by Farm Bureau were spelled out in the "McKinsey Slides" in this exact wording. 

1) Radically alter your approach to the business of claims.

2) Aggressively pursue increased profits at the direct expense of policyholders.

3) Work to alter rules and regulations concerning bad faith laws because this new scheme will violate existing laws.

4) Force innocent policyholders to litigate legitimate claims rather than settle with them.

5) Initiate the "good hands strategy" (pay small claims quickly and fairly) or the "boxing gloves strategy" (fight to the end).

6) Promote the use of the "Colossus" program for estimating claims which automaticly cheats to the tune of 20%.

7) Offer low "take it or leave it" settlements based on "Colossus" estimates.

8) Expect 90% of policyholders to succumb with in six months due to economic pressures and give up without a fight.

9) Deliberately abuse the civil justice system as a weapon of attrition against the 10% who refuse to accept the low offers.

10) Expect aggressive litigation to yield positive results.

11) To activly incite significantly higher levels of needless, frivolous litigation  as a tactical strategy to delay or diminish

      legitimate claims.  

12) McKinsey stated that fewer policyholders and their lawyers would be willing or able to litigate and their only other choice  would   be   to accept about 40 cents on the dollar for legitimate claims.

13) One McKinsey slide depicts an alligator sitting and waiting for a victim.  The caption reads by postponing payment, insurance companies can hold money longer and wear down policyholders to the point of dropping a challenge. 

Farm Bureaus implementation of this McKinsey strategy is very evident in their policy of instigating these 200 plus lawsuits against policyholders with legitimate claims, only to settle after many years of delay without ever proving a case in court.  And in Farm Bureaus claims manager, Eugene Parton stating under oath that Farm Bureau had instigated a policy of going "all electronic to eliminate all paper work.  I believe Farm Bureau is one of the worst abusers of the civil justice system in Missouri.  I also believe Farm Bureau is guilty of abuse of process, conspiracy, and rackateering.  I hope someday they will face these charges under the RICO act. 

These McKinsey Slides were ordered to be turned over to the court, but to date the insurance company has refused the Judges Order and is now under Contempt Of Court.  If these slides, with all their evidence are ever made public it will open a floodgate of lawsuits against all insurance companies, not just Farm Bureau. 

As of 9/17/07 Allstate who has possession of these McKinsey Slides has been ordered to pay $25,000.00 per day until they turn them over to the court.  It has been rumered that Allstate says thats nothing to them and they might pay it forever rather than make the slides public.

As of approximatley 10/18/07 Allstate Insurnance has settled this case with the people from Warrensburg, Mo. who sued for disclosure of the McKinsey Slides. The amount was for over a Million Dollars.  (The slides are once again unavailable to the public.)  Farm Bureau, and their law firm, Brown and James can breathe easy until someone else sues for the release of the McKinsey Slides, and the corruption they would disclose. 

(7/28/08 Another attempt is now being made to get these incriminating policy documents released for public view.)
Farm Bureau and Allstate's Dirty Secrets Revealed

HEADLINE: Allstate's dirty secrets revealed, lawyer claims; Its playbook calls for paying pennies on the dollar:
When David Berardinelli hears stories of New Orleanians battling Allstate Insurance Co. and feeling shortchanged on their Hurricane Katrina claims, he says he knows the culprit: the McKinsey documents. People are having trouble collecting insurance proceeds because they're up against a corporate strategy hatched by the high-powered consulting group McKinsey & Co. that taught Farm Bureau, Allstate, State Farm, and many other insurance companies how to boost profits by squashing claims, said Berardinelli, a Santa Fe, N.M., lawyer who has written a book about the strategy. "They are vital to an understanding of why the people down there, two years later, haven't had their claims paid," Berardinelli said of the McKinsey documents that were developed in the mid-1990s. "The real catastrophe has been the failure of these major insurers, especially Farm Bureau, and Allstate . . ., to keep their promises. These big companies have turned their backs, for the sake of profits, on people at the time they needed them the most in order to be able to show Wall Street how much more money they had made."
Berardinelli has been hired by a number of New Orleans plaintiffs attorneys to try to prove the link behind the corporate strategy and Katrina claims problems. His quest to get thousands of McKinsey presentation slides placed into the public realm has surfaced in the Lake Catherine case, Dale Delatte v. Allstate, in a hearing on the issue in front Magistrate Judge Alma Chasez today in U.S. District Court in New Orleans. Local attorneys say the hard-nosed claims-squelching tactics Berardinelli outlined can be seen in the volumes of Katrina disputes and more specifically, in the first two federal court cases against Allstate, where the company accused the claimants of fraud when the claimants pushed for more money.
Allstate says in court filings that the documents are outdated and irrelevant to the settlement of Katrina claims. Spokesman Mike Siemienas declined to address the allegations raised in Berardinelli's book, but offered a written statement about the "attacks on Allstate and other insurance companies."
There has been no response from Farm Bureau to this date.
McKinsey spokesman Mark Garrett said his company can't discuss the confidential advice it offers clients.
Berardinelli has become something of a celebrity in trial lawyer circles after he briefly got a hold of 12,000 McKinsey slides in a personal injury auto case in New Mexico. Although he was required to return the documents to Allstate, he took notes on the slides and wrote a book about what he says are fraudulent claims practices at the Northbrook, Ill. company, the nation's largest publicly held personal lines insurer. The 2006 book "From Good Hands to Boxing Gloves," gets its title from a McKinsey slide advising Allstate to don boxing gloves for any customer who doesn't accept a settlement officer for pennies on the dollar.
Insurance used to be considered a quasi-public trust that's supposed to function as the safety net for the middle class, Berardinelli says in his book. But McKinsey, which worked for other insurance companies before perfecting its strategies with Allstate, orchestrated a radical shift by transforming that all-important trust into a high-stakes zero-sum game where the interests of Wall Street are placed above those of policyholders.
"It's more than just a change in one company. It's more about a replacement of the traditional paradigm of insurance," Berardinelli said in an interview in New Orleans in early May.
The basic concept, Berardinelli says, is that bad faith insurance companies give customers a choice: accept a settlement now for a fraction of the true cost of damage, or expect to spend several years in grueling litigation. McKinsey predicted that 90 percent of claimants would be forced to capitulate because they'd need the money in a prompt settlement, Berardinelli said.
"People are giving them money for something they will never receive," Berardinelli said. "What that really means is they're selling uncollectible insurance."
These bad faith insurance companies strategy has paid off handsomely, Berardinelli says. In the years since it began implementing McKinsey's strategy, these companies profitability shot through the roof. In the ten years before the McKinsey strategy was implemented, Allstate was making an average of $82 million a year in pre-tax operating income. In the ten years after the McKinsey plan roll-out began in 1995, Allstate was making an average of $2.4 billion a year in pre-tax operating income. Similar figures can be assumed for Farm Bureau, State Farm, and all the other bad faith insurance companies out there.
"That does not happen unless they're cheating. There's no place for that to come from unless they're underpaying claims," said Berardinelli, who has a request pending before the New Orleans court to name him an outside legal counsel in the Delatte case.
Allstate denies Berardinelli's allegations. In court filings, Louisiana's second largest residential insurer says the McKinsey documents weren't used in the adjustment of Delatte's claim or any other Katrina claim, and has asked Judge Chasez to stop the "plaintiff's fishing expedition."
Allstate says that while it redesigned some of its claims-processing procedures based on McKinsey's recommendations, much of the advice was never implemented, and producing the now-outdated slides, which were used in brainstorming sessions, would "create a highly misleading picture" of insurance companies. The company says it considers the slides to be confidential and proprietary information, and disclosure of the slides would harm Allstate's competitive position. Moreover, just because Berardinelli, "who has made a career out of his anti-Allstate crusade," disclosed summaries of Allstate's slides without the company's consent, it doesn't mean U.S. District Court in New Orleans should open them up for Katrina litigation.
"The McKinsey documents have no conceivable relevance to plaintiff's claims," Allstate's opposition motion by attorney Judy Barrasso reads. "Those documents, which address McKinsey's and Allstate's review and analysis of Allstate's claims handling procedures in the early 1990s, are clearly not relevant to plaintiff's property damage claim arising from Hurricane Katrina in August 2005."
But Berardinelli says the proof is in the profits. In a December 12, 2006, presentation to Goldman Sachs Financial Services, Allstate bragged about its profitability to investors, saying that its average payout on homeowners claims is lower than for the property and casualty industry as a whole.
Berardinelli said that slide is tantamount to an admission that Allstate shorts people on claims and that the McKinsey tactics are at work.
"That slide in my opinion is the smoking gun. What other explanation is there for why Allstate is paying so little? That obviously relates to the Louisiana homeowners claims," he said.