Florida insurance commissioner demands Allstate internal documents in probe

Jan. 1, 2020
Allstate’s feeling some searing regulatory heat in the Sunshine State as Florida insurance investigators are demanding that the insurer provide them full access to controversial internal documents relating to the company’s claims settleme

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Allstate’s feeling some searing regulatory heat in the Sunshine State as Florida insurance investigators are demanding that the insurer provide them full access to controversial internal documents relating to the company’s claims settlement practices.

Insurance Commissioner Kevin McCarty in January took the unprecedented step of suspending Allstate’s authority to underwrite any new policies in the state. An appeals court stayed that order a day later; a sweeping probe by the Florida Office of Insurance Regulation remains active amid continued court filings.

Allstate “actually swung into a lot of action after we suspended their license for 24 hours,” says Tom Zutell, the commissioner’s deputy communications director.

Thus far the insurer has provided regulators with nearly 40,000 pages of information, according to Allstate spokesman Adam Shores, including 12,000 to 13,000 pages of the so-called McKinsey Report that purportedly details how the company saves money through “low-ball” offers that allow it to pay less for settling automotive claims.

The latest submission “demonstrates our willingness to work with them,” says Shores, contending that the McKinsey Report contains key “trade secrets.” “Our main concern is that those documents remain protected,” says Shores. “The hesitation (in providing them) was a precautionary measure. We’re going to continue to work with the Office of Insurance Regulation.”

Allstate has yet to completely comply, Zutell counters. “The subpoena required all the documents. We do not have all that was asked for.”

McCarty – who has the enthusiastic backing of Florida’s Republican governor, Charlie Crist – has petitioned the appeals court to reinstate the company’s suspension until it is fully compliant with the subpoena. The judges are under no deadline to take any action.

“It continues to trouble me that Allstate has not complied with our subpoenas and is not willing to explain to us their relationships with rating agencies, modeling companies and trade groups and how these relationships might have influenced the huge rate increases they have requested,” says McCarty. “This clearly cannot be in the best interests of Florida consumers.”

He is particularly miffed that Allstate submitted 51 pages of objections to the subpoenas rather than promptly producing the materials.

The commissioner abruptly terminated a meeting with Allstate officials, saying the company was not cooperating. “In view of Allstate’s ongoing, blatant disregard of our subpoenas, I have little choice but to take an action that will send a clear message about how seriously I am taking this issue,” McCarty declared at the time.

“I also am frustrated that Allstate keeps trying to tell us which documents are relevant to our investigation,” he announced. “Suspending their certificate of authority to write new business in our state should make my point.”

Meanwhile, the probe continues amid much media coverage. News accounts have described unease among Allstate agents along with representatives of other Florida insurance companies. They express concern that the contentious dispute will escalate into closer scrutiny directed at the entire industry.

Most body shop owners would welcome such a development, observes James McHugh at McHugh’s Quality Collision and Restoration Work in Hollywood, Fla. “Maybe the government will say, ‘We’d better start taking a look at these guys because they’re getting too brash,’” according to McHugh, railing against a prevailing labor reimbursement rate of just $38 per hour.

“The labor rate in Florida hasn’t been raised in three years,” he reports, noting how the figure has not kept pace with repairers’ costs.

McHugh rejects entering into direct repair program arrangements and has seen a number of his customers forced into court action to recover their rightful settlements. “We don’t work for any insurance company; we’ll work with all insurance companies,” he says.

Customers are billed for what the work costs, and McHugh says all who have challenged their insurer’s payment amount in court have been successful in recovering their out-of-pocket expenses.

“I’m happy about the stand our insurance commissioner has taken,” says industry supplier Steve Fink, past-president of the Florida Automotive Industry Association. (His late father Melvin was a charter member of the FAIA when it was founded in 1955.)

Fink, owner of Terry’s Auto Supply in Hollywood, is calling for independently administered labor rate surveys throughout every Florida marketplace. “There ought to be a study” that emphasizes third-party impartiality, he says.

The controversy between the insurance commissioner and Allstate comes as no surprise to Fink, based on opinions voiced by his collision industry accounts. “They’re not popular at all among my customers,” he says, citing a consensus that “Allstate comes in last” when compared to other Florida insurance companies’ fairness in settling claims.

“We are committed to our customer base,” says Shores, pointing out that Allstate has close to 2 million Florida policyholders, and presumably they are pleased with the service they receive or else they would purchase their insurance elsewhere.

Zutell at the insurance commissioner’s office declines to detail specifics of the Allstate probe because the investigation is ongoing. But typically investigative interest is piqued when “they detect a common thread” woven into patterns of consumer complaints received by regulators.

The dispute over the McKinsey Report began with the commissioner’s efforts to review Allstate’s bid to raise property insurance rates, Zutell notes.

Indeed, says Shores, that remains a key reason why Allstate believes the report should be kept under wraps – it deals with auto policies, not homeowner accounts.

However, Zutell says state regulators have the authority to look into any aspect of an insurer’s business practices in search of the aforementioned common threads; hence the relevance of the McKinsey Report.

The gist of the initial Allstate investigation stemmed from its actions regarding hurricane coverage and a resulting dustup over the rates the company can charge.

When an array of insurance providers insisted that their Florida hurricane loses were excessive, state legislators approved a $12 billion plan to provide the companies with the necessary re-insurance. Policyholders were subsequently supposed to gain a corresponding rate reduction.

More than 80 percent of Florida’s insurance companies complied, says Zutell. Allstate was among those that refused. “They got cheaper re-insurance and did not pass those savings onto their customers; they wanted a 42 percent increase,” he recounts, leading to suspicion that Allstate is “colluding with other insurance companies to keep the rates artificially high.”

It is possible, according to Zutell, that Florida’s investigation into this matter could “become a poster child for other states” regarding regulatory scrutiny.

(California is also embroiled in a rate-related disagreement with Allstate — see that story HERE: http://abrn.search-autoparts.com/abrn/article/articleDetail.jsp?id=482254

The contents of the McKinsey Report are likely to be of great interest to collision repairers, although thus far the details it contains remain hush-hush. A few lawyers connected to specific cases nationwide have been granted access with court-ordered provisions to keep it close to the vest – the pages contain special watermarks to prevent photocopying.

An investigative piece by Michael Sasso in the Tampa Tribune compares the intrigue surrounding the McKinsey Report to a John Grisham mystery novel. McKinsey & Co. is a worldwide consulting firm, and the documents prepared under contract in the 1990s “allegedly show how the insurance giant intentionally has made low-ball claims offers to its customers for years, netting Allstate billions of dollars in the process.”

Sasso quotes a plaintiff lawyer in New Mexico who has viewed the elusive tome. “These documents are devastating to them in bad faith litigation,” the source reportedly said.

Another lawyer, David Berardinelli, has written a book based on notes he took of the McKinsey Report. Called From Good hands to Boxing Gloves; it is available only to trial lawyers with proper credentials.

Referring to the company’s strategy of presenting a “fast-track” settlement offer, Berardinelli claims the documents reveal how Allstate would offer insurance claimants an extremely low offer during the first 90 days after an auto accident. During these initial 90 days people are the most in need of money and most likely to accept a low-ball offer, said Berardinelli, according to Sasso, who says Berardinelli believes this practice constitutes fraud while also suspecting that other insurance companies have received similar advice from McKinsey.

About the Author

James Guyette

James E. Guyette is a long-time contributing editor to Aftermarket Business World, ABRN and Motor Age magazines.

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