Saturday, March 21, 2009

McKinsey Strikes Again

"As I was reporting my brother's story, I discovered something about Pat's former insurance company: last May, insurance regulators in Connecticut imposed a record $2.1 million in penalties on two Assurant subsidiaries for allegedly engaging in a practice called post-claims underwriting--combing through short-term policyholders' medical records to find pretexts to deny their claims or rescind their polcies. ... Assurant agreed to pay the fine but admitted no wrongdoing. ... It took Pat and me less than 10 minutes to fill out the complaint form over the internet. ... On Feb. 9, we had an answer: Assurant maintained that it had done nothing wrong and that Pat should never have relied on short-term coverage over a long period. ... Those extraordinary circumstances included the fact that the state insurance department was sniffing around", Karen Tumulty/San Antonio at Time, 16 March 2009.

Why do I put McKinsey, the "very prestigious" consulting firm, in this post's title? Because in about 1995 McKinsey did a study for Allstate, the "good hands" people, telling it how to avoid paying insurance claims. Supposedly, Allstate saved $700 million over a few years by following McKinsey's suggestions. What's the problem? An insurance company has a fiduciary duty to its' insureds! No one got indicted for this. Look at the possibilities: insurance fraud, a state crime, or wire and mail fraud, federal crimes. These studies will end when it does not pay to do them. Which will be? When an insurance claimant with cancer and six months to live goes to Allstate's president's office 357 magnum in hand and empties all six chambers into the guy. Or the McKinsey partner. Will McKinsey take another "Allstate" study then? Who would staff it thinking claimants with nothing to lose will come gunning for them? Literally! The Chairman, Mao Zedong, said, "Political power grows out of the barrel of a gun". Never forget it. Like Big 87654 firms, there is little if anything a large law, CPA or consulting firm won't say for a fee. Sad, but true.

3 comments:

Anonymous said...

IA...

Pity that "very prestigious" doesn't incorporate a moral dimension... makes you wonder about your society when the "very prestigious" firms are hunting for ways to defer benefits that are earned...

Was consulting ever an "honorable" profession?

Independent Accountant said...

Anonymous:
Like any other occupation, consultants do some good work and some questionable work. The "nuts and bolts" stuff, i.e., plant layout, production scheduling, physicial distribution studies, etc., appears to be solid. The "strategy" stuff, less so. Then the consultants get into what I call "public policy" stuff, like KPMG's Hartford stadium study which is just lobbying. Or McKinsey's Allstate study, which I saw as criminal. Big Law firms get involved in this all the time, subverting the law for their clients. That's why you have characters like NY's "ping pong ball Fed", Mary Jo White.
I'll let Mark Antony answer your question, "Here, under leave of Brutus and the rest--For Brutus is an honorable man, So are they all, all honorable men", Julius Caeser, 3:2:9-11.

Yes, they are "all honorable men", Zimbabwe Ben, Tim Geithner, Robert Rubin, Vikram Pandit, Mike Garcia, Eric Holder, Lloyd Blankfein, most rating agency executives, most Big 87654 partners, most NY BigLaw partners, most McKinsey and Bain partners, "so are they all, all honorable men". If you believe that, I've got some ocean front property in Arizona to sell you.

W said...

Service as NY state attorney general should be a prerequisite for appointment as US Attorney General.