Wednesday, April 26, 2006

Why Insurance Companies Suck

A new book about the insurance industry, specifically Allstate, is fighting in the courts to be released. By David Berardinelli, From Good Hands to Boxing Gloves paints a very ugly picture about Allstate. Berardinelli, a lawyer, became interested in Allstate when he was granted limited access to some 12,500 PowerPoint slides produced by McKinsey for Allstate during the 1990s. The slides, which Berardinelli had to obtain a court order to gain access to, sheds light on the deliberate tactics Allstate adopted in order to increase profits and shareholder value. Allstate would rather not have these facts, as presented in Berardinelli's book, make it to the public, as it would tarnish their well crafted image of pretending to care for their clients.

In the 1990s, Allstate hired McKinsey to help them develop a strategy to basically make more money. The strategy McKinsey developed went beyond just increasing efficiencies and fighting fraud. Berardinelli's access to the McKinsey work showed him that Allstate, and by association, other insurance companies that McKinsey also advised, sought to aggressively reduce claim payments. Focus was placed on claims for subjective injuries -- such as emotional distress -- reducing settlement payouts; and, reducing the number of claimants that sought legal advise. In other words, Allstate, and their ilk, systematically went about to thwart their customers and keep the bounty they had extorted.

This should not come as any surprise to those who are awake. The insurance industry has become nothing more than an organized racketeering business. These are people who take your money on the promise that they will be there if you ever need them. They profit from making sure that they keep as much of what you've given them. Yes, there are those who defraud insurance companies -- but which other business treat all of their customers as if they were crooks? (OK, maybe the music and motion picture industries -- so that puts insurance in good company.) It has gotten to the point where we pay insurance companies for a benefit that we're afraid to take as the price for accepting the benefit is too steep. After every claim, the hoodlums just hike up your premiums.

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