Allstate’s Esurance Hopes Bundling Auto, Home Coverages Will Separate It From Geico

By Noah Buhayar | November 12, 2013
Home Car House Residential Bundle

  • November 12, 2013 at 1:41 pm
    Agent says:
    Hot debate. What do you think?
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    So the consumer should just buy HO from one of those Esurance geeks that has no understanding of HO coverage etc? I am sure they will recommend proper valuation, forms etc. If it is like what we see on Auto, it will be totally screwed up. You are in good hands with Esurance.

    • November 12, 2013 at 4:36 pm
      Response says:
      Hot debate. What do you think?
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      You realize Esurance Agents are licensed Agents, right? They have the same knowledge any licensed agent has. Same as you.

      • November 13, 2013 at 10:34 am
        Mr. Solvent says:
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        Culture is about 80% of training, not pre-licensing or CE. Direct culture is nearly always sales no matter the cost to the consumer. In this case I think you’re dead wrong.

      • November 13, 2013 at 10:46 am
        KD says:
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        Being a licensed agent only means they were able to pass the state licensing exam and background check. When I first started out I had no business writing home insurance but I am lucky enough to work for a strong direct write company which emphasizes proper training before they allow us to handle policy holders’ largest assets. Other companies send you off and running day one and Agent is correct in saying that most of them probably have little to no understanding. By no means does every licensed agent have the same knowledge. Its actually quite scary how little some licensed agents know.

        • November 13, 2013 at 12:21 pm
          Agent says:
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          KD, It always helps when an agent has proper training, takes some CE classes to learn about HO forms, coverages and how to insure property correctly. In Texas, we see all kinds of coverage done by carriers. Compare State Farm, Allstate & Farmers group and they will all have nuances to compare with what your carriers are doing. When we see Farmers or Allstate, they will almost always insure a home for less than true Replacement Cost. Farmer’s recently agreed to return $117 million to current and former policyholders for overcharges they made years ago. State Farm is still appealing their overcharges from years ago.

  • November 12, 2013 at 1:55 pm
    Eric says:
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    Does the average consumer have any idea that GEICO does not sell their own home insurance? Maybe once they get their Travelers dec page in the mail.

    I am also confident that even though GEICO does not UW their own home business they do give bundling discounts when both policies are purchased from GEICO.

    • November 12, 2013 at 3:17 pm
      Agent says:
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      Yes Eric, I have converted one of those GEICO/Travelers customers. The Travelers policy was not underwritten like what we have to do with Travelers, the valuation was off and it was expensive. I don’t care if they give bundling credits or not. It was not written right and the agent was out of Virginia. How could they know about Texas homes and forms? In the meantime, Travelers tells us we can’t write monoline homes or we face a commission cut. I wonder what that Virginia agent makes on the commission.

    • November 12, 2013 at 3:43 pm
      SWFL Agent says:
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      Not sure Esurance can solve their problem. Obviously consumers are buying from Geico and their lack of bundling is not an obstacle. So Esurance is going to bundle when consumers aren’t demanding it? Maybe the “build it and they will come” strategy will work but I doubt it. Want to compete with Geico? Cut cost to the bone and advertise like heck.

      • November 13, 2013 at 10:35 am
        Mr. Solvent says:
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        Geico’s success can be directly attributed to spending over a billion in advertising. Any other company that wants to start ponying up that kind of money can experience similar growth as long as rates are in line.

        • November 13, 2013 at 2:26 pm
          SWFL Agent says:
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          “As long as rates are in line”. You said a mouthful here. Yes, it’s true that the $1b in advertising is the catalyst that drives Geico’s sales, but they are able to keep their rates “in line” because of a culture that keeps their expenses, claims and underwriting, to an absolute minimum. Additionally, over the past couple of years they have managed to temper rate changes to a point where they’ve not chased away large numbers of policyholders. Something that IA companies just can seem to master. Can you imagine what would have happened to Geico’s book if they implemented the same pricing strategy that Travelers has used? It probably doesn’t hurt either that they can manage their reserve portfolio with the backing of Berkshire Hathaway. Most companies are not and won’t ever be in this position.

  • November 12, 2013 at 1:59 pm
    KentU says:
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    I don’t see how Esurance is going to underwrite a home policy over the phone or internet. Unlike auto insurance, you can not underwrite a house policy without inspecting it first. As a Farmers agent, I get referrals for house insurance from consumers that bought their auto from 21st Century – a Farmers company. It has worked out well as I inspect the house to see if it qualifies for Farmers or Foremost and the customer gets a discount on both the auto and home policies. I get a good commission on the home policy which is usually less time consuming to service than the auto policy.

    • November 12, 2013 at 4:38 pm
      lonestar says:
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      KentU, what will you FIG agents do if 21st Century starts selling home insurance too? I had enought of Farmers screwing the agents, that is why I no longer represent them.

      • November 13, 2013 at 12:06 pm
        KentU says:
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        lonestar, fact is that eventually almost all carriers are going to be selling auto, home and life policies directly to the public and cutting out the agents via online and 1-800. I’ve spent my 34 year career on building a book of quality customers that want the advice (and E&O policy) of an agent to handle their insurance needs. I’ve learned to use the business that I lose to the internet carriers to write the customer’s business that they want the advice of a good agent. I have customers that keep their policies with my agency when I remind them that if I make a mistake then, I have a policy (E&O)that provides coverage to my customers.

        • November 13, 2013 at 4:58 pm
          lonestar says:
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          So, if I read you correctly, you currently do not feel insulted that Farmers is giving 21st Century access to your FIG auto customers’ policies to quote over there, and you would also not have a problem with them competing directly against you with a 21st Century home policy, because customers care much more about an agent than the price? Be careful how many tools you give to the fox that is trying to get into your henhouse. His name is FIG/Zurich, and he is about to rent a bulldozer to knock over your fence if you let him…

          • November 14, 2013 at 1:15 pm
            KentU says:
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            That’s not at all what I am saying. I am facing the facts that consumers are going to be buying more insurance products online now and in the future. If my customers are getting solicited by 21st Century then, they are also getting solicited by E-Surance, GEICO and anybody else selling online. Farmers is not doing anything different than the carriers that independent agents work with or will be doing in the future. I’m putting a bigger priority on providing value of my advice and service to customers who appreciate it. I’ve noticed that some customers will buy their auto insurance online because they ‘think’ the policies are more standardized – an entire separate discussion. Whereas home policy forms differ a lot from one carrier to the next so, they prefer to buy their auto from 21st Century but, only trust the home policy to an agent. Farmers still provides the auto-home discount on the Farmers home policy if the auto is with 21st Century so, it makes my prices more competitive on the home policy. By the way, 21st Century premiums are often higher than agent written policies. The positive has been that quality customers that value the advice and service provided by a good agent are almost always easier and less time consuming accounts to service.

    • November 12, 2013 at 6:17 pm
      Agent says:
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      Theoretically, Esurance was to offer quotes from several carriers when they started out. I wonder how those carriers will be used for HO quotes. My guess is not much.

  • November 12, 2013 at 2:29 pm
    Paul says:
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    GEICO once underwrote their own homeowners insurance book. They got out of it – sold it to Aetna who the sold their P&C company to Travelers. They couldn’t control the BS factor – customers insuring vacant houses, unoccupied houses multifamily houses posing as single family houses, tenant occupied houses posing as owner occupied houses. Seems the carrier side has a short memory which destines them to repeat the same stupidity over and over again, usually every five years or so we see an announcement of some “new” thinking which is actually something already tried and failed. Meanwhile, we agents continue to subsidize carrier idiocy while they seeks ways of cutting us out of the picture.

    • November 12, 2013 at 3:58 pm
      Auto PM says:
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      Isn’t it great how agents know how to run an insurance company better than the people that run insurance companies, but most agents have never tried to do it? Conversely, how many company people try to tell agents how they should run their agency but that person has never been an agent? I hear this all the time and none of those comments are constructive. I just say that both jobs are difficult and let’s respect those that are honestly trying to do their jobs well. And, I agree that actual “new” ideas are very, very rare. I have seen/heard far more recycled ideas than actual new ideas. Let’s hire some creativity into this industry!

  • November 13, 2013 at 9:34 am
    Agent says:
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    As an agent, over the years I have been called on by numerous company reps who proclaimed they used to be in the agency business and knew how we felt about negative changes etc. I took what they said with a grain of salt. Anyone who has been an agent and failed to make a go of it were either not smart enough to know what to do or didn’t want to make the extra effort to be a success.

    • November 13, 2013 at 10:39 am
      Mr. Solvent says:
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      And there’s our winning comment of the day. Now onto the bonus round!

  • November 13, 2013 at 9:42 am
    Agent says:
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    I believe an Independent Agent is a career, a passion. Not a job. No one can convince me working the phones for Esurance or Gieco is a well planned career choice. Besides all of our professional goals, we aren’t part of our community, We are our community. Esurance and Gieco don’t coach local football, donate and sponsor local events on a regular basis, And if they ever do they’ll make a commercial about it !

    • November 13, 2013 at 2:09 pm
      SWFL Agent says:
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      So are “working the phones” at a mortgage company, utility company, or at any other company that employs a large customer service staff a waste of time? Get off your high horse on this one. Everyone has different capabilities and limits. There have been customer service employees that have moved into loss taking and into other claims positions at these companies.

      • November 19, 2013 at 8:14 am
        common sense says:
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        SWFL Agent, can’t you read? It’s only a waste of time if you’re not coaching the local football team. Duh.

    • November 18, 2013 at 2:15 pm
      Voice of Reason says:
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      Painting and poetry are passions, agents are a leftover relic from an insurance environment that existed before the internet. If Esurance wants to up their game, they need to work on that 117 underwriting ratio without raising rates. (Hint: It’s called efficiency.)

      FYI; several large carriers, including GEICO, sponsor local community teams and events. Obviously you missed the commercial.

  • November 13, 2013 at 11:48 am
    jw says:
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    Some interesting comments, but nothing here explains why State Farm is the largest. Any theories?

    • November 13, 2013 at 2:51 pm
      Agent says:
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      # 1, they have had the largest distribution of agents across the country for a long time. They are on every major street in my town. They also advertise quite a bit and sell their services. I do think they have gone a little too far advertising financial services, car loans etc and many of these agents have put their Personal Lines on automatic issue and they are losing some business now. They have also got hurt on their failure to return overcharges to customers on HO in Texas. I don’t think their customer base is as loyal as it used to be.

      • November 14, 2013 at 8:17 am
        jw says:
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        I don’t know about any other states, but SF is actually picking up market share in KY. They passed the local farm bureau about 2 years ago and just keep growing. I just find this all interesting because SF is successful doing what this article says is not successful. Well, what Alstate thinks is unsuccessful.

        I’ll be curious to see how the esurance bundling works. There are many things that can go wrong here.

        • November 14, 2013 at 9:43 am
          Agent says:
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          jw, I think the reason why State Farm is picking up share in Kentucky is that they have identified Kentucky as a place they can make money because it is not known to be a heavy weather state. In Texas, it is quite the opposite since we are a heavy weather state. You wouldn’t believe what they are doing to HO here. They are imposing a 2% W & H deductible on their renewals, asked for more rate increases from the TDI and generally don’t seem that interested in growth in this state. They would rather sell financial services and do car loans. That’s ok with me. I like writing their customers.

          • November 18, 2013 at 2:04 pm
            J.S. says:
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            Interesting comments but you should check out the current Best’s Review magazine. The number 1 writer of Homeowners insurance in Texas – State Farm with over 25% of the market; number 2 – Allstate.

            Whatever you may think of them, they continue to dominate personal lines.

          • November 18, 2013 at 7:44 pm
            KentU says:
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            Agent, I agree with you. JS, you are also correct but, State Farm is losing market share in Texas at a rate that has many of their agents worried and breaking the back of many newer agents. I have quite a few friends that are either State Farm agents or CSRs for SF agents. Most of them tell me that they have never seen a policy loss this bad before and many of them have been with SF for over 30 years. It is my understanding that SF wants to decrease their risk exposure in Texas at any cost to PIF.

    • November 18, 2013 at 11:49 am
      Paul says:
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      State Farm is a mutual. They don’t need to listen to shareholders about how best to allocate capital. They have also had huge advertising capabilities for some time. Much of marketing is just showing up. GEICO has spent billions in the last few years in an effort to gain marketshare. It has worked. It’s a long slog. Meanwhile, IA carriers are stuck on an antiquated model which punishes agents for natural disasters and underwriting failures, even now when they all are now using predictive modeling and multivariant rating. The IA carriers will never grow as long as they continue to choose favorites, or losing agents will simply roll their books to either gain scale for bonuses rather than doing what’s right for insureds and giving the public choices.

  • November 13, 2013 at 5:32 pm
    Don says:
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    Esurance never made a profit before Allstate bought it….Allstate is missing the boat. The more complicated our society becomes the more folks want one on one help…..Progressive still gets 75% of its business from agents……

    • November 14, 2013 at 10:25 am
      lonestar says:
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      Don, good points. According to recent insurance articles I have read, the common thread is that the days of the captive agent are numbered, and the future of insurance will be IA and direct. Progressive will tell you that their agent channel auto stays on the books 2.7 times as long as their direct channel written auto. Also, their direct channel auto acquisition cost is higher than the IA acquisition cost. As long as this remains true, I think the IA channel will remain quite viable. The captive channel, who knows. But we can all agree that the captive agent will die long before the IA agent does.

      • November 18, 2013 at 11:53 am
        Paul says:
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        Progressive, though the don’t pay great, they also accept the risk for poor underwriting results. They don’t have minimum premium thresholds. They take what you send them, and then pay your for your work. They didn’t grow to be as large as they are by shoving a spoon in your face and threatening contract withdraw for not enough production, or penalizing the agent because a catastrophe blew through.

      • January 20, 2014 at 10:21 am
        Agent says:
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        Lonestar, Progressive has also been known to tell a fib or two to their agents. They say the agent quotes are the same pricing as the direct quotes and I caught them on several of those misstatements. There is no way their acquisition costs are more on the direct channel vs Agents since they pay no commission on direct. I do agree with you that the captive channel is sinking and many in that situation would just love to be an IA where they have more to offer than one market.

        • January 20, 2014 at 12:56 pm
          KentU says:
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          It is the loss ratios that make the difference. Progressive actuaries told us at a meeting in Arlington, Texas that their loss ratio for agent written policies is significantly less than Progressive Direct. They attribute much of this to the agents inspecting vehicles when the policy is written and when they are added. Progressive Direct results show they pay out a significant amounts on claims on vehicles that probably already had damage when the policy is written. I’ve heard this same story from an adjuster with GEICO and I have no reason to believe that it isn’t true with all carriers that write directly to the customer without the inspection of an agent.

          I find the same results as yourself with Progressive’s pricing but, sometimes I find my agent quotes are less. The pricing is definitely isn’t consistent.

  • January 19, 2014 at 1:49 pm
    Marty Bennett says:
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    Had my fill of insurance companies making record profits at the expense of the people they *should* be covering.

    Please check out my story so you can understand my take on this article:

    http://www.martyversusaig.com

    Feel free to comment!



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