Professional Documents
Culture Documents
ALLSTATE The Darker Side 2010 Condensed
ALLSTATE The Darker Side 2010 Condensed
ALLSTATE The Darker Side 2010 Condensed
Summer 2010
Is Allstate Really
the Best? page 18
From Good Hands to
Boxing Gloves Two
Agent Reviews of the
Controversial Book
page 41
Allstates Hidden
Agenda page 44
The Comprehensive
Recreational Activity
Policy Allstates
Secret Weapon to
Becoming #1? page 22
State Farm
Exploits Allstate
Agent Terminations
page 14
AMagazine
Magazinefor
forAllstate
AllstateAgency
AgencyOwners
Ownersand
andAllstate
AllstatePersonal
PersonalFinancial
FinancialRepresentatives
Representatives
AA
Magazine
for
Allstate
Agency
Owners
and
Allstate
Personal
Financial
Representatives
Exclusivefocus
Summer 2010
FEATURES
18
24
27
31
34
An Extraordinary Event
41
44
53
BUSINESS
14
28
32
BY DOUG JOHNSTON
BY ROB LOOMIS
BY STEVE MOHR
51
BY TODD MCINDOO
MARKETING
16
20
40
BY ROBYN SHARP
55
HUMOR
22
50
DEPARTMENTS
6
10
58
59
62
Presidents Letter
Letters to NAPAA
Membership Application
NAPAA Market Place
Index to Advertisers
Summer 2010
book review
Review Number 1
Trial attorney David Berardinellis
book, From Good Hands to Boxing Gloves,
tells about a side of the Allstate business
plan that company management would
prefer to keep secret. Starting with a
recap of an accident involving Jose and
Olivia Pincheira, Berardinelli progresses
to Allstates handling of their claim and
Summer 2010
Exclusivefocus 41
Review Number 2
I do not believe maximizing prots for
the investors is the only acceptable justication for all corporate actions. The investors
are not the only people who matter. Corporations can exist for purposes other than
simply maximizing prots. John Mackey,
Whole Foods Market CEO
The time is always right to do what is
right. ~Martin Luther King, Jr.
Sears - Satisfaction Guaranteed or
your money back. Allstate - Youre in
good hands. Reputation. Integrity. Doing the right thing. These are, or were,
the driving forces of business. Yet we as
agents, and especially long-term agents,
who have lived by these attributes for years
have seen these same virtues disappear at
Allstate. We sense it like we sense a storm
coming by the wind shifting in the trees.
Somethings amiss in our corporation.
Just who is the corporations customer? As
agents, we know who our customer is, but
who is Allstates customer?
In the must-read book From Good
Hands to Boxing Gloves: The Dark Side of
Insurance, attorney and author David J.
Berardinelli exposes what agents know
all too well: the shareholder is Allstates
customer and enhancing shareholder
return is its underlying operating principle. Mr. Berardinelli is a trial lawyer
who worked to become the rst person
to obtain the now infamous McKinsey
Documents. The book talks about how
the documents teach insurers to prot
by denying or delaying claims, and how
Allstates Good Hands treatment of its
customers has been supplanted with a
more aggressive and adversarial approach
which, metaphorically speaking, requires
the policyholder to don a pair of boxing
gloves to spar with the company in order
to reach a fair claim settlement.
As agents, we know the traditional
rules of insurance. Our customers believe
us when we tell them that their homes,
autos, property and their lives are in Good
Hands. We are the face and heartbeat of
Summer 2010
Summer 2010
Exclusivefocus 43
feature
Summer 2010
Summer 2010
Enron is
not McKinseys
only controversial
connection.
McKinsey has
been associated
with a lawsuit
related to Hurricane
Katrina, Swissairs
bankruptcy, the
British railway
nancial collapse,
Allstates claims
practices,
and more.
might plan a way to distract you so I can
take the last piece of birthday cake. All in
good fun, of course. But when greed involves money, the potential for schemes
or plans would seem to be limitless. As
we will see, some plans end with a different than expected outcome.
Why McKinsey?
It would shock most of us if it was
reported that the CEO of a prominent
corporation called a press conference and
publically declared, I think Im going to
be greedy today! Rather, we hope he declares a hopeful future for his company
that is consistent with sound business
ethics and mindful of his duciary responsibilities toward company employees, shareholders and the general public.
But when the CEO has a plan that enriches him at the expense of others, an
ethical line has been crossed that ought
to land him in jail. Any plan a CEO undertakes that breaches the ultimate duciary responsibility of putting employees
and shareholders rst is a defacto lie.
And therefore, for greed to exist there
must also be a lie at some level.
Most of us remember the Enron scandal. At the time it represented the premier
example of corporate greed. To then-Enron CEO Jeff Skilling, the potential for
immense wealth was so overpowering
that the lies he was willing to tell were
practically boundless. In the end, greed
blinded him so much that he was even
willing to risk an insider stock trade
for 500,000 Enron shares worth $15.5
million. It is doubtful Skilling set out to
defraud Enron at the beginning of his
tenure with the company. Rather, it was
his Harvard MBA, combined with his
training at McKinsey as one of their top
executives that offered him the insight to
recognize the opportunity. Said another
way; knowledge, plus greed, plus the lie
equaled the potential for untold wealth.
In all, the Enron collapse represented the
loss of more than $60 billion in market
value, $2.1 billion in retirement savings
and 5,600 jobs. Skilling wasnt willing to
think about the consequences of his actions, he only saw the cash.
If the old adage of the apple not falling far from the apple tree is true of
people, it likely has a similar adage for
corporations. In 1979, fresh from getting
his MBA from Harvard, Skilling was
recruited by McKinsey and Company.
There he enjoyed a kinship-like bond
and a plethora of business skills unrivaled in his industry. By 1987, he was a
top executive for McKinsey and proved
his considerable talents while working as
a consultant to Enron. In 1990 he was
recruited by Enrons Ken Lay to be CEO
of Enron Finance Company. In 2001,
Skilling became CEO of Enron Corporation. A scant few months later, Skill-
Exclusivefocus 45
Dear Shareholders:
What is yours, is mine
If corporate prots are the primary focus of a CEO, can greed be far behind?
What differentiates a successful CEO
from one that is going the way of Enrons
Jeff Skilling? Shareholders would argue
that the former enriches the value of a
company and takes care of his employees. The latter enriches himself and takes
Summer 2010
Summer 2010
It is difcult
to say when
Allstates plan will
fail. This is because
so much is riding on
the outcome of what
Allstate started with
McKinsey. Millions,
if not billions, of
dollars are at stake
for Allstate
management.
really just a way describing how careful
we must be in assuming a client will be
loyal to our company. But the context
in which the question was asked and
answered left no doubt that in Allstate
managements eye, a departing agent
does not own his client list. And this is a
key moment, if ever there was one, in our
ability to understand how Allstate views
its relationship with the agent. Because if
Allstate proceeds on the assumption that
agents have minimal or no real rights to
the economic interest in their books of
business, then its right to conscate the
agents books is a forgone conclusion.
annual reviews, and more are the magicians lovely assistants that distract the
agents, it is the carefully crafted, hidden
elements of the trick that make everything possible.
Here are the elements Allstate doesnt
want the agent to see:
Establish a complex set of everchanging guidelines which are geared for
only partial success, constantly forcing
agent turnover.
Manage agent turnover rate so that
the constant outow of agents provides
the company with a specied premium
base that has no commission expense
against it.
Require a constant infusion of newlyhired agents that are channeled to sell life
and annuity products as a requirement to
keep their jobs, thereby providing Allstate
with ever-increasing sales contributions
to its nancial services goals.
Deny approval of qualied buyers.
Deny or limit purchase of books by
Allstate agents.
Require sales management compensation to be directly related to the agents
RFG bonus structure. If agents achieve
certain bonus levels, managers will be
compensated accordingly. When agents
fail to qualify for bonuses, a managers
will be affected bonus as well.
Urge agents to invest substantial
amounts of money so that they cannot
easily walk away from their agencies.
Require senior management to be
nancially committed by making them
purchase a percentage of their salary
in Allstate stock. From Allstates 2005
Proxy statement:
Stock ownership requirement
Because we believe strongly in linking the
interests of management with those of our
shareholders, we rst instituted stock ownership goals in 1996 for executives at the
vice president level and above. These goals
were increased in 2004 to require these executives to own, within ve years of the date
the executive position is assumed, common
stock worth a multiple of base salary:
Chief Executive Ofcer 7 times salary
Senior Management Executives 4 times
salary
Other Executives 2 times salary
Exclusivefocus 47
RetirementSolutions
Innovative solutions for todays retirement income challenges.
2008, UNFCU Financial Advisors LLC, a United Nations Federal Credit Union owned company.
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Summer 2010