An article in The Huffington Post says that Allstate and other insurers have nearly doubled their profits since the 1990s by following a new model of business that produces purposefully low offers to claimants. Those who accepted the low-ball offers received prompt service, the article states, while those who didn’t had their claims delayed and potentially had to resort to bringing pricey lawsuits to fight for adequate compensation.
The new business model was introduced by McKinsey & Company, a consulting firm which was the focus of the book, “From Good Hands to Boxing Gloves.” It went away from the traditional way of adjusting claims to a computer-driven method that supposedly produced intentionally low offers to claimants.
The proof that Allstate achieved its objective of more profit with the new method, the article stated, is $4.6 billion in profits in 2007, double its take in the 1990s. A consultant quoted in the article said the huge increase in profits was the result of “driving down loss values to an average of 30 percent below the actual market cost.”
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