McKinsey consulted with State Farm on Xactware estimates following Katrina – Schafer v State Farm

If you type “McKinsey” into “Search” at the top of the page, you’ll find a multi-page listing of related SLABBED posts. What you will read, however, is far from a glowing report on a Company that touts, “Our alumni number more than 18,000, and work in virtually every business sector in over 80 countries” on its website.

One of the recurring questions about McKinsey is what role the Company’s consulting played in the way insurers handled policyholders’ claims following Hurricane Katrina. McKinsey was a named defendant in the anti-trust case filed by former Louisiana Attorney General Foti who accused the Company of “advising insurers to ‘stop ‘premium leakage’ by undervaluing claims using the tactics of deny, delay, and defend’ “.

After the case was dismissed, State Farm spokesman Phil Supple commented, “We felt these allegations were completely unfounded from the outset, and we’re pleased the court today agreed with our position”. State Farm continued to maintain that position in Schafer v State Farm, according to the Schafer’s Reply Memorandum in Support of Motion to Compel.

In its Opposition, State Farm stated: “McKinsey has not provided any services or documents to State Farm in connection with the adjustment or handling of Hurricane Katrina property claims, and McKinsey materials accordingly are wholly irrelevant here.” The Gourgues affidavit (attached to State Farm’s Opposition) states, in part: “Since that time [1998], however, McKinsey & Co. has provided no services to State Farm that have impacted the handling of Hurricane Katrina property claims in Louisiana.”

However, the Schafers also say, “This is just not true” and provide supporting documentation for their claim. Continue reading “McKinsey consulted with State Farm on Xactware estimates following Katrina – Schafer v State Farm”

Holiday week open thread plus Monday Music.

Things are still busy for me here on the coast and I haven’t much time to spend posting. That said there is one story from the business world I caught a while back from the New York Times via Yahoo I thought was good. Turns out the statistics our government uses to calculate levels of economic activity are unreliable. Then again we all knew that for example in the Summer of 2008 when gas prices were at $4 the Bushie economic team was telling us the economy was not in recession when most of the populace was clearly struggling. Now we know why:

A widening gap between data and reality is distorting the government’s picture of the country’s economic health, overstating growth and productivity in ways that could affect the political debate on issues like trade, wages and job creation.

The shortcomings of the data-gathering system came through loud and clear here Friday and Saturday at a first-of-its-kind gathering of economists from academia and government determined to come up with a more accurate statistical picture.

The fundamental shortcoming is in the way imports are accounted for. A carburetor bought for $50 in China as a component of an American-made car, for example, more often than not shows up in the statistics as if it were the American-made version valued at, say, $100. The failure to distinguish adequately between what is made in America and what is made abroad falsely inflates the gross domestic product, which sums up all value added within the country.

American workers lose their jobs when carburetors they once made are imported instead. The federal data notices the decline in employment but fails to revalue the carburetors or even pinpoint that they are foreign-made. Because it seems as if $100 carburetors are being produced but fewer workers are needed to do so, productivity falsely rises — in the national statistics. Continue reading “Holiday week open thread plus Monday Music.”

If you can’t trust anti-trust, what can you trust?

I’d rather be posting my recipe for Cranberry Daiquiris than tackling anti-trust issues – and probably should do both as there is little entertainment value in the subject.

If you read my earlier post and want more background, I suggest this tag-on of Sop’s from late summer when he stepped in to help me find my way back from an unexpected detour by Road Home.

Although today’s ruling was in federal court; the Katrina insurance antitrust case was filed in State court – and for good reason.  Louisiana has a State anti-trust law, one of the defendants insurers is domiciled in Louisiana, and the alleged price fixing took place in the State.  However, the defendants were successful in their effort to move the case to federal court; and, it appears from the Ex Parte consent motions on the docket, that Buck up Buddy had also been successful in resolving his concerns about Foti’s contracts with private attorneys.

The State’s interest was represented by one of the staff attorneys from the AG’s office, Jane Johnson, who filed a reply memorandum in support of motion to sever as suggested in a related Fifth Circuit ruling on the case now known as Louisiana ex rel Caldwell v Allstate.

The Attorney General proposes what the 5th Circuit ordered, that this Honorable Court decide on the best course of action and is suggesting severing the claim for injunctive relief because 1) that allows more options for this Court in deciding how to proceed, and 2) that is what the Fifth Circuit suggested…

Allstate is only one of the Defendants.  Others insurers named as defendants include State Farm, USAA, Lafayette, Farmers, and Standard Fire.  In addition to the six insurers, there are four other defendants – McKinsey & Company; XACTWAREMarshall & Swift /Beockh, owner of Integriclaim; and Insurance Services Office, Inc – familiar names to SLABBED readers who have followed the scheme. Continue reading “If you can’t trust anti-trust, what can you trust?”

The Herald Tribune Takes the Allstate Challenge and Slams Claims Practices

I saw a link posted today on the Yahoo ALL board where Nowdy and I also post that I can’t let slide by today.  Before I jump to today’s Herald Tribune story some background is needed. This post will be long out of necessity. I hope our readers can hang with us while the story is developed.

First stop is the Allstate corporate website and a press release issued just hours after Commissioner McCarty suspended Allstate from doing business in Florida.

Allstate announced today that it publicly released approximately 150,000 pages of documents pertaining to a review of its claim practices conducted in the 1990s. Allstate was assisted in the review by business consulting firm McKinsey & Co. Continue reading “The Herald Tribune Takes the Allstate Challenge and Slams Claims Practices”