Yes folks it is real. We had to sell Nowdy’s youngest child into slavery to come by the screen capture.
Actually Rick was not lying about Greenberg’s buddy eating oysters at Drago’s with us.
We slabbers have spies everywhere. 😉
sop
53 thoughts on “The Slabberator Causes Some Commotion”
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we googled it up.
http://new.soa.org/files/pdf/ERMCaseStudy-Table2.pdf
Sop:
Believe me, THEY have more spies. Some who never post are probably diagraming this blog like my eighth grade English teacher did to complex sentences.
Here is a couple of links I found Rick, for those so interested. The Ruin Theory and Ruin Probability Plot (pdf page 25). A mathmetical treatise on Ruin Theory and a quick primer on Stochastics, which is also used by technical analysts for stock trading.
sop
Thanks. I liked playing with the buttons on the real one. Seems like you could probably figure out the earnings for the company with that model you boys got over there. With the earning figured out you could goose the price of the stock. This would come in handy if you were on some sort of weird commission or bonus pay structure where the price of the stock was important to your total CEO compensation?
Those formula’s looked right nice SOP and I think I understand them all. I was wondering what this stuff meant?
Tied in to incentives
http://www.soa.org/files/pdf/2008-qc-detoro-henderson-42.pdf
A Brief History of the Slabberator
By Tom W.
In 2000, The Allstate Corporation startedo on an exciting and uncharted new course: to become an early insurance industry adopter of enterprise risk management (ERM). It has been a complex journey that has helped provide a deeper insight into the company
Then, in late August, Hurricane Katrina hit the Gulf States, where Allstate had significant exposure. Because Allstate had been in discussions with the rating agencies before Katrina and was able to demonstrate the outcomes of its modeling, the groundwork had been laid for frank discussions about the company
Steve, do you have a source for the information you had in the comment that began…”Those formula
Yes. You have to click down on the first page. Its a workshop outline.
http://www.soa.org/files/pdf/2008-qc-detoro-henderson-42.pdf
It appears nowdoucit that they used this computer program to “maintain its ratings.” Of course that begs the question when did they meet with the rating agencies? How did they get the numbers from Katrina loses to put into the program? Etc. It would be nice to talk with the good people from the rating agencies and check their notes from the meeting. etc This might open a whole new avenue of research into the actions taken by big insurance post-katrina. Certainly not having RE for Louisiana was a major problem and it might have been resolved by use of this computer program.
If each claim is unique and processed one at a time how did they know the numbers to give the rating agency? Depends on when the meeting with the rating agency occured but it is possible the meeting was very early on after Katrina. If so than it might shatter the belief that insurance is risk based and not profit based. The computer program designed by CSC lets the company choose the level of payout so it might be related to that as well. Either way its something to look into in my opinion.
Hate to keep posting but this is such a target rich area. Some readers may remember the Towers and Perrin outfit being the same one which was used by the AIA to produce misleading projections of possible risk associated with the wind/water legislation. Despite having a very powerfull lobbiest present the information not one Congressmen quoted the report during Congressional hearings. Why? Well Towers and Perrin was in their own Congressional hearings down the hall being called to the carpet for a CEO pay scam—
Towers Perrins Stonewalling Congress on CEO Pay Inquiry
In Saturday’s New York Times, Gretchen Morgenson reported that House Committee on Oversight and Reform had issued a subpoena to Towers Perrin, an executive compensation consulting firm, because it had failed to comply with an information request regarding potential conflicts of interest in its pay consulting business.
Now because this was a news story, rather than her weekly column, Morgenson had to hold her tongue, so I will fulminate on her behalf.
Anyone with an operating brain cell knows that the comp consultants have had a central role in burgeoning CEO pay. It’s really simple. You create certain fictions about CEO compensation, like they have to be paid “competitively.” This is an odd notion, given that corporations aren’t baseball teams, swapping staff at regular intervals. The market for CEO comp should be pretty inefficient, given that CEOs don’t trade often and aren’t fungible (Steve Jobs may be brilliant, but how many companies could he run? You wouldn’t put him at the helm of Ford or Chevron or Pfizer, to name just a few). And you have some examples of CEOs taking well below what they could extract. For instance, Jeff Immeldt of GE paid himself only $3.2 million last year because he believes a large pay gap between him and the rest of his executive team is demotivating.
But by making pay more transparent, the comp consultants have created the illusion of liquidity in the CEO market. If we pay our CEO too little, someone might bid him away! Yikes!
Now here is the inspired bit. By virtue of creating the fear of having an underpaid CEO, many boards set targets for where their CEO should be paid in their comparable universe (that universe is created by the Delphic comp consultant). Many board have set as a target that their CEO should be paid in the upper half of the comparable universe (many set a specific target, say 50th, 60th, 75th percentile). These targets are irrespective of performance. Performance incentives go on top of that!
Now, since no board wants to believe that it has a substandard CEO (in Lake Woebegone, all children are above average), most boards set a formal or informal target of having their CEO paid in the top half. This of course is a statistical impossibility, so companies raise their CEO’s pay to keep him in the top group, which raises the averages, which forces companies whose CEOs whose pay has slipped on a relative basis to raise pay, forcing the average up again. It’s like a greyhound race. No one is ever gonna catch that rabbit.
Now why would Towers Perrin need to be bludgeoned to cooperate while other comp consultants have responded to the House document request? My bet is their records have someone commenting knowingly on how this scam works. If you can maintain the pretense that you are an honest professional and the bad outcomes are an unfortunate side effect of you innocently trying to do your job, you pass go. But if you demonstrate awareness that there is a scam afoot, and knowingly perpetuate it, you go to jail, or at least get called bad names in public
Makes you wonder who helped Allstate with their CEO search?
If I remember correctly Towers and Perrin were representing both the CEO’s who applied for jobs and the companies they applied to work for. So some claimed they might have leaked insider info to one or both sides. Anyway I think its hard to project the bonus structure for CEO’s in insurance because the cost of production so to say of the product is not know when you set the price for your product IE premium. What I would want if I was a devil of CEO is to have software to project the future earnings or even controll those metrics PLUS to have my company representing me in my CEO pay structure know what the future target goals for the company are reasonable—-
Imagine the Slabberator being hooked up to the Bonuserator—
Executive Compensation
The discipline of determining how
I went to bed early. When I woke up, I realized that Steve is way too smart.
Way, Richard. Turn yer back on these slabbers… jus’sayin…
“On 1 November 1907, he was hired at the Assicurazioni Generali, a large Italian insurance company, where he worked for nearly a year. His correspondence, during that period, witnesses that he was unhappy with his working time schedule
Found this over at ALL finance and thought it would be of interest.
A couple of thoughts:
It might be that the resolution on my screen isn’t up to the task, but I don’t see any place on the “control panel” to “let the company choose the level of payout”. In fact, it looks like the “control panel” is all about the decisions one makes for a book of business pre-loss, so the company can model that book’s profitability and capital requirements. Am I wrong?
Also, someone asked how the carrier can possibly make aggregate loss estimates shortly after a Cat like Katrina, if each loss has to be adjusted on its merits. The answer is that such aggregate loss estimates are, you know, ESTIMATES. Guesses. Based on historical experience, a carrier with a lot of insured properties within a storm zone (and a lot of historical experience) ought to be able to make some guesses about the total loss that are within an acceptable margin or error. The process of doing such estimates is more art than science, since every storm is a little different. The summer of KRW was particularly tricky, since it generated demand surge issues that might not have been apparent early on.
But the broad outlines of such a process ought to be fairly obvious: cut the storm footprint into severity-based zones, apply different percentages of loss to each zone, multiply times number of properties and average values, etc…
A carrier COULD refuse to do such estimates and tell the world to wait until every last claim is paid before the carrier answers such questions, but I suspect that such a carrier would discover that the investment, analyst, rating agency and regulatory communities would not find such an answer acceptable.
Excellent observations Mr CG. Do you agree even the control panel should be more art than science. The recent trend has been the other way.
You insurance guys need to take your industry back from the moneychangers. PPL like Wilson and Liddy are frauds.
Sop
“”It might be that the resolution on my screen isn
CG—Sorry this should be the right link and here is the part of the report which pertains to your point—
“”As the key element of CCPR, Allstate uses a program known as
Thanks, Steve. I’ve been by but found the new qui tam filing and had to set my other plans aside to get it up.
But isn’t Colossus just for bodily injury claims?
What does that have to do with homeowner’s claims?
Here’s a simple primer: homeowners claims in a Cat are almost exclusively for damge to the structure (plus ancillary loss as a result of that damage, like contents). That’s called “property damage”.
Colossus is for claims where someone is suing a policyholder because they allege the policyholder negligently hurt them. Those are called “bodily injury claims”.
Do you understand the difference now or do I need to do this again using shorter words?
Now, with that side trip over, I restate my original question: does anyone see anything on the “control panel” that deals with modification of claim payout? I don’t, but as I said, my screen resolution is poor.
Claimsguy:
You are correct that Colossus only applies to B.I. claims.
But once again, I have to correct a half-truth. You write: “Colossus is for claims where someone is suing a policyholder because they allege the policyholder negligently hurt them.”
First, as I am sure you well know, Allstate’s use of Colossus includes UM bodily injury claims. Yes, that’s right, first-party contractual claims. So your “primer” to Steve (as if he needs one) is no primer at all, but simply an insurance half-truth.
What you also probably know is that when McKinsey consulted with Allstate on the CCPR, the “new approach” applied not only to homeowner’s claims, but also to CAT claims.
I hope my words were short enough.
Trahant:
I have not addressed McKinsey in this outing. That is a whole other story.
On UM/Colossus, that’s news to me. If you say it covered UM, I’ll take your word for it.
Going to the point of this conversation, do YOU see anything on the “control panel” that addresses changing claim values? I don’t, but as I have noted, I think the thing is very hard to read, so I am willing to have someone correct me. But what I CAN make out is a tool for making strategic decisions about a book of business pre-loss. I await further clarification on this.
If it is what I think it is, then all we really have is a graphic presentation of the sorts of strategic decisions any carrier has to make to decide how to manage a book of business in the aggregate, and I don’t see how that is wrong.
It seems like the people on this board either don’t want the carrier to think strategically, or want them to use other tools.
CG you misstate my criticism badly I like financial tools, especially the kind I make my living using. Taleb calls the math behind ERM charlatonism, I agree with him.
For me it answers several questions I had concerning what drove some of the dumber industry decisions we’ve seen lately.
This whole thing reeks of the type of idiocy that drove firms like LEH under and AIG into Uncle Sams arms. The difference is the little ppl are on the ass end of ERM
Sop
Claimsguy, I don’t know how familiar you are with these big systems. However, if you’re suggesting all functionality would be shown on this dashboard, then you’re mistaken.
The dashboard is extracting data specific to the assessment of risk to capital. It does replace the chalkboard of the past as you,I believe, mentioned.
But using the chalkboard example to visualize the process, the first data to compile are those that produce the baseline for further calculation.
The deskboard design is for decision makers who may lack the computer skills necessary to test various options – and want to make some decisions with the privacy available.
If the initial results are more capital than risk, then subsequent queries can scale increases and the decision maker(s) can decide how much additional risk to assume.
If, on the other hand, the results show more risk than capital, subsequent queries are scaled downward until a point acceptable to the decision-maker(s) is reached.
In actual use, when a risk to capital decision is made and adjustment is needed – either assuming more risk or reducing risk – the process is just beginning when the decision is entered on the dashboard.
The dashboard system transmits it throughout the system. Specific to your question, If the required adjustment is 85% of baseline, then when the risk assessment system connects with the claims handling system, those data are the baseline on all related cost and the system will calculate claims with 85% as 100%.
Quote: “and the system will calculate claims with 85% as 100%.”
i don’t know what that means. Does it take individual claim values and revise them? Are you saying this system tampers with reserves on open claims? Does this happen in a manner invisible to the individual adjuster? Wouldn’t such an adjustment show up if the claim file was subpoened by (for example) Trahant?
I ask this because you and several of your shill posters have stated that the capital allocation decisions made via the “cotrol panel” flow through to individual claim files. I don’t believe you. I think that is a lie. Such post-loss tampering with the claim process would be visible six ways to Sunday, and the Trahants of the world would have already made fortunes litigating that. It would be a turkey shoot.
But since you make that allegation, it is incumbent upon you to back it up or pull it back. As I said, I think you are lying.
As a shill poster, I can tell you that none of this stuff shows up in claims files; one must dig much deeper, which requires several rounds of motions to compel (then, you only get it if you are extremely lucky). Ground level adjusters, even claims management, have no idea about how all of this works. I don’t claim to know exactly how it works either, but I know it’s there.
It’s not until you get possession of certain super-confidential documents that you start learning the concept of “leakage” and how to control it. Believe me Claimsguy, I’ve been there, and I actually possess such documents.
Neither the adjusters nor lawyers have any concept of these methods. This is left to actuarials somewhere near the executive level.
Also, be careful how you categorize “the Trahants of the world” because one of us does tons of Allstate defense work, even Katrina cases. Holiday conversations never involve work.
Finally,there are not fortunes to be made in Louisiana by litigating coverage issues or insurance misconduct. Our laws are simply too industry-favorable.
Well, you certain got up on the wrong side of the bed. I’m going to make coffee and decide if it’s not up to you to prove I’m lying or pull back.
Here’s a case, CG
Trahant:
My point is that you and others seem to be alleging that the financial decisions made via the “control panel” result in financial adjustments on open claim files.
That is a far cry from talk about leakage studies and the like, which are forward-looking appraisals of claim handling practices.
If your allegation is true, it would be a simple thing to see: one day the reserve is X, the next day it is 85% of X, the change having happened without adjuster action or input. Imagine your deposition of the adjuster:
Q: Sir, on (date), you set the claim reserve at X, is that correct?
A: Yes
Q Then why, at the time you made your offer to my client, was the reserve at .85X?
A: I don’t know.
Q: Did you change it?
A: No
Q: Who did?
A: I don’t know.
Q: But you only offered .85X because that was the reserve, and you couldn’t exceed that sum, right?
A: Yes.
Have you had any such depositions? I rather doubt it. I doubt it because I think the process being alleged here is imaginary.
Which leads me back to the more fundamental point: if the “control panel” is a tool for determining capital allocation and making strategic decisions about what business to write and on what terms, then so what? It’s a business tool like hundreds of others. If the objection is that it is a BAD business tool, then by all means, don’t invest in or do business with the company that uses it. But do not pretend that you are really interest in those issues, because that is a transparent lie.
The community on this site hates homeowner’s carriers because they have had the temerity to suggest that flood means flood, and to say “no” to the something-for-nothing crowd. That’s fine: I respect that disagreement and am happy to see it discussed on the merits. But to seriously suggest that the people here care about the effiicacy of Allstate’s capital allocation process is facially absurd.
Nowdoucit:
You have specifically alleged that the “control panel” links capital allocation decisions to individual claim files. That is, as you must know, a very different thing from saying some adjusting software underprices drywall. Unless, of course, you are saying that a link between the “control panel” and the adjusting software calibrates that alleged undervalue based on higher-level corporate decisions about capital allocation.
Understand this: if you are right, you have stumbled onto the biggest, baddest bad faith case of all time, and the lawyer who follows through and proves it up will make a lot of money and become a legend.
But it is easy (as you have shown) to utter those words. It is hard to prove them, especially since, as I believe, they are utterly false. Extraordinary claims require extraordinary evidence. You have alleged something quite serious. Either you know it to be true and can demonstrate that, or you made it up.
Pick one.
Claimsguy what I find interesting is you don’t defend the inherent folly in the bogus math theory behind your dashboard and its perverted use as a substitute for judgment in management.
No matter how you slice, dice, bob and weave you can’t get past the old saying garbage in garbage out.
In the end the systemic problems with insurer underpayments post katrina originated someplace and seeing silliness like that dashboard gives us a great idea where.
Live in denial despite the mountain of evidence.Is a tin foil hat a prerequisite for working in big insurance?
Sop
Claimsguy, when you have an end to end system, there’s nothing extraordinary required. It’s just how the system works.
You may think it absurd to suggest “people here care about the efficacy of Allstate’s capital allocation process” but I contend no one cares more. The more efficient and accurate the process, the better – as it makes it more likely insurance can be affordable. It’s not just Allstate either – it was State Farm in the case I linked for you.
The software developers have done an incredible job and IMO the entire claims handling process at some point will be handled by people located at sites away from the disaster.
Remember this article?
Same house. Same repairs. Same insurer. Why different prices?
http://www.nola.com/timespic/stories/index.ssf?/base/library-125/1179643604234300.xml&coll=1
Where did the different estimates for materials and labor come from?
The estimates per sq. ft. were different on every claim, suggesting that they were fudged up the line (not by the adjusters) to come up with the end result of maxing out the flood policy and discounting Allstate’s liability.
Do I ever remember the article. I’m working on a post with a similar theme. Probably not fudged up line but just a matter of setting the system so it would generate balance and divide by the number of square feet. Same everything else but the idea is to “let the system do the talkin”
SOP: I haven’t bothered to try and understand the underlying math. It is beyond my business knowlege to know if the formulas are right and if the interrelationships among them are right, and I am pretty sure it’s beyond yours, too.
Neither do any of us know if the “control panel” was ever really used as a serious tool or whether it was just there to illustrate the interrelatedness of the financial concepts involved.
And I would suggest that the idea of “systematic underpayments” is a fable. One you strongly believe in, I know, but that hardly makes it true. In every first party claim, there is amount the policyholder wants and the amount they are actually owed. The fact that those two numbers aren’t identical (and they rarely are) is not evidence of “underpayment”, unless your definition of that term is “not giving me everything I want”. It IS evidence of that combination of policyholder greed and ignorance that accompanies so many claims. (“Deductible? What do you mean I have a deductible. I never agreed to that!” Or “I paid $500 for that suit (or sofa or stereo) and its only 5 years old. I want $500. Or “What do you mean flood is excluded?” Or “What do you mean that a 25 foot high storm surge is a flood. That’s not a flood.” )
Carriers want to pay exactly what they owe. Not a dime more, not a dime less. (Missing in either direction imposes penalties that are obvious and painful.) Do their people screw up occasionally? Of course they do. The law of large numbers guarantees it, and it is especially likely during Cat situations, when the claim handlers, who are only human, are stretched particularly thin. But the massive underpayment conspiracy (a.k.a “the Scheme”) is a fairy tale. Embrace it if you must for the comfort it offers you, just as you embraced Santa and the Tooth Fairy.
You made my point about the slabberator CG and I do understand the mathmetical fallacies upon which it based. If you have not read Taleb’s two books Fooled by Randomness and The Black Swan please do so and you’ll understand too.
The systemic underpayments is addressed in detail in the Rebecca Mowbray’s award winning article Brian linked earlier.
If you have trouble comprehending Taleb and the inherent fools game in actually thinking these interelationship can be quantified to a reliable percesion given all the variables and the fact their magnitude changes over time let me know – between me and Russell we should be able to get you over the hump.
Sop
Wow, I should not have spent the day offline working. I’ve seen lots here, but Claimsguy’s statement: “Carriers want to pay exactly what they owe. Not a dime more, not a dime less” has got to be the most “facially absurd” statement ever.
Here’s where you lose big-time, Claimsguy. Why don’t you go sit in a mediation and watch the carrier make 12 incremental offers before a settlment is reached? I guess if the plaintiff said “yes” to the 3rd offer, the carrier would say, “Oh, I was just kidding, let me pay you 3 times as much (the level of authority).”
I try to be respectful, but your statment is ludicrous. How do I know, because I have done insurance defense work in the past. In 100% of the cases I defended, the carrier said something to the effect of, “Our authority is X, but see how far below that you can settle.” JOKE, JOKE, JOKE!
“””But the broad outlines of such a process ought to be fairly obvious: cut the storm footprint into severity-based zones, apply different percentages of loss to each zone, multiply times number of properties and average values, etc
I hope my brief post with a link to the complete text of Robert Hunters recent testimony in Congress didn’t mislead anyone.
MEASURE #5: CLAIMS HANDLING ALLSTATE HAS BEEN AN INDUSTRY
Steve:
Your words are not “short” enough. Some insurance shill, who will not identify himself or his occupation, is sure to swing at you.
I have sat with the Great Bob Hunter. His words are certainly “short enough.”
Well Richard while you were sitting with Bob CSC’s attorney was running Hank Greenberg’s shill organization called The Atlantic Legal Foundation. That is something that Greenberg dude we meet probably doesn’t even know. I always feel we are judged by the company we keep.
Again you
Apples and oranges, Trahant, apples and oranges.
But for the benefit of the rest of the shills, let us review. In third party BI claims (which is, to my reading, what McKinsey focused on in the ALL documents and what they were talking about when they made the famous “boxing gloves” comment) there is no one right amount that is due and owing. The range of reasonable outcomes is just that: a range. It is neither unfair nor inappropriate for the carrier to bargain hard with the third party claimant in an attempt to get them into that range so the case can settle. Since there is no restriction on claimants from making outrageous demands, getting them into that range often requires many rounds of give-and-take.
Let us take a hypothetical example: carrier’s policyholder is involved in an intersection accident with a third party. There is a factual dispute regarding who had the right of way. The claimant suffered various soft-tissue injuries, missed a couple of days of work, had an ER visit and a dozen or so follow up trips for PT. what is the reasonable value of that claim? What should the carrier pay? The answer is (obviously) it depends, and the longer answer is that there is no one number that is the right value. So the claimant and carrier negotiate. The carrier has no customer relationship to the claimant: in fact, the claimant is the adversary of the carrier’s customer. The more the carrier pays, the bigger the number that will go on the customer’s loss experience, and the worse will be the blowback to the customer’s rates in the future. So, on behalf of the customer, resolving that claim for the lowest reasonable value possible is the right thing to do. For the carrier, there is no reason to pay more: no customer benefit, no business benefit, no legal benefit. that negotiaion could be quite difficult, since there are a lot of variables. If it is a classic “red light/green light” accident, with each driver insisting he had the green light, the possible range of outcomes is very, very broad, and so, therefore, will be the negotiating range. Cases where both liability and damages are variable can be very difficult and very contentious.
But the claimant is free to demand a million dollars for that claim. Does that demand make a million dollars the right amount for that claim? Obviously not. Is there any possible reason the carrier should humor that demand? Not that I can think of.
In first party work, the areas of variance are fewer and, since the claimant is a customer, there are more reasons to want to bend over backwards in the customer’s favor. But that doesn’t mean there won’t be a negotiation, especially over things like contents and business interruption, where determining the amounts due can be quite tricky.
The assumption for the plaintiff and plaintiff-shill community seems to be that whatever a claimant demands is automatically the amount owed. That is pure nonsense.
As for adjuster authority, OF COURSE the carrier limits that. Why wouldn’t they? You match up authority levels with experience and expertise, as you do in any business. (Think of loan officers, for example. Do you give the junior officer the ability to make a zillion-dollar loan? Of course not.) Of course the plaintiff lawyer wants to make the carrier give infinite authority to some inexperienced adjuster, so that lawyer can browbeat the adjuster into doing something stupid. But making plaintiff lawyers (or their shills) happy shouldn’t be what carriers are about.
Finally, to the original point, I don’t recall Mowbray writing anything about a link between the “control panel” and claim payments. Are you really saying she wrote that?
Regarding McKinsey:
I haven’t read every page of the documents that were posted by Allstate, but what I read was pretty innocuous stuff. Especially as to homeowners and cat handling, I didn’t see anything that would indicate McKinsey was recommending that Allstate behave inappropriately towards its customers. (The slides seemed pretty service-oriented to me.) To the extent that any of you can link to objectionable slides, or give reference numbers for them, I would love that, as I am always trying to learn. If I am wrong, I am wrong, and I will say so.
But my understanding of what I have read is that the stuff in those slides that people find objectionable is the “boxing gloves” stuff, which deals with third-party BI claims as discussed above. And there, the outrage from the plaintiff lawyer community is all for show. OF COURSE they don’t want lower initial offers and lower settlements. Because then their third (or 40%, whatever they are taking for fees) is lower. In that setting, the plaintiff lawyer’s outrage is on behalf of his own checkbook. It is that simple.
Off the top of my head, claimsguy, I don’t know of any “objectionable slides” nor do I think the “outrage” is related to attorney fees.
Instead, IMO, McKinsey, was the first documentation consumers had that their insurer was not on their side. I understand that to those in the industry it represented an effort to improve the claims handling process. What it failed to recognize was the consumers’ perception of insurance as a trusted “friend” – the “great protector” they depend on to protect their investment in property.
The outrage was from the sense of betrayal at finding out that to insurers they were not a “friend” in return – just a source of income.
McKinsey was the “grandfather” of data driven decisions in the claims handling process. The data indicators were significant and, no doubt, carried over to Six Sigma where they were further defined/refined.
I remember driving down the highway connecting I-10 to Waveland and seeing cars up in trees like Christmas ornaments – symbolic of McKinsey making consumers feel they were “up a tree” and their insurer was on the ground with their money.
I wonder how different the outcome would have been had the industry recognized the concumers’ perspective and talked honestly about the need to transition from a focus on profit to inscreasing income from controlling loss.
So much positive has been said about Obama “treating” the voting public like the adults we are. What is does is establish the mutually trusting relationship missing from and badly needed in the insurance industry.
Nowdoucit: Your perception of the McKinsey slides (not to mention where you place them in time) is way, way off.
First, who equates wanting to pay third party claimants less to engaging in anti-customer behavior? Only plaintiff lawyers, who (as I previously noted) are neither impartial nor disinterested. Remember, the third-party claimant is the enemy of the customer. It is the person suing the customer. It is the person seeking to darken the customer’s loss run and reputation.
Any equivalency between the customer and the third-party claimant is false. Pure and simple.
Second, while the McKinsey slides are very old, (to look at them is to realize that: they are pre-Powerpoint and it shows) I don’t think they became a public phenomena until pretty recently, so to claim they were at the beginning of any trend is factually wrong.
I also think that any sense that those slides are connected to any public groundswell at all is likewise wrong. The McKinsey slides are an inside issue, popular among a very small group of interested pleaders, none of whom really care about insurance industry management, but all of whom are interested in, directly or indirectly, lining their pockets by exploiting the matter.
The prime movers on those slides have been the bad faith lawyers who thought there was gold there. There isn’t. They have seen the inside of one courtroom, and the jury didn’t buy them. Since they went into the public domain, the noise about them has ceased entirely, likely because there is really nothing objectionable there. (At least not that I have seen or been referred to.)
Why people think it is inappropriate for insurance companies to act like businesses is beyond me. Using data to make decisions? Outrageous! Thinking quantitatively about how they allocate capital? Travesty! Trying to improve profits? Criminal! (One of your posts actaully seemed to express outrage that carriers used litigation management software to better manage legal expense! And that would be evil because…..?)
All of which goes back to my more fundamental thesis: the anti-carrier crowd are generally engaging in a dialogue about how insurance companies run under false pretenses. None really care about capital allocation decisions or governance issues. They care about inflicting pain becauise they are angry about carrier resistance to their overreaching, whether it is plaintiff lawyers masquerading as “policyholder advocates” or Gulf Coast residents trying to forget they bought policies with flood exclusions. All the rest is window dressing, false pretenses and red herrings.
Claimsguy, I think you’re the one way off and I’ll come back and explain why as soon as I get another break.
“Gulf Coast residents trying to forget they bought policies with flood exclusions. ”
This is why we have a thing called Flood Insurance. The flood policy was not the problem with Gulf Coast insurance. It was the wind insurance. Just thought I’d point that out to you. It wasn’t the flood exclusions which gave us problems. It was the wind exclusions from our wind policies that gave us problems. Hope this helps.
Long day, CG, the bottom line here is that further discussion of McKinsey on this thread is a red herring that needs to flounder.
Will come up with another thread and post tonight or tomorrow.
May have to call it Steve and CG’s …
“including their policyholders who filed claims”
Call it Robert Hunters. I recommend reading his report linked here again for anouther time.
“I didn
Steve:
Hunter isn’t a primary source. He is a plaintiff lawyer shill. Show me something from a primary source.
CS- You want me to show you a single slide from the training program for Allstate employees that reads—This is how we will screw over our employees to make our CEO rich? Won’t find that CG.
What you will find is what was presented. An ENTIRE body of work was presented by McKensey which shifted the manner inwhich claims were processed.
The problem I have with the change is Allstate asserts it operates under the pre-McKensey model of claims processing. Pre-McKensey claims were adjusted by experienced adjusters who had a range of possible payouts. The offers for settlement by the adjuster depended upon the merits of the claim and guides of the policy. This is not how the system works now.