Allstate Insurance Co. is reopening brick-and-mortar offices in Massachusetts after a quarter century of absence.
Back in 1987, the Northbrook, Ill.-headquartered Allstate closed its offices in Massachusetts and pulled out of the market, citing the state’s strict regulation of auto insurance rates.
But Massachusetts’ regulatory environment has been changing in recent years. In 2008, the state began implementing “managed competition” and took steps to deregulate private passenger auto insurance rates.
This move to managed competition has brought a number of insurers — including GEICO and Progressive — to the state’s auto insurance market. Allstate started to again offer private passenger auto insurance in the state in 2009 — through its agents from neighboring states (including Connecticut, New Hampshire and Rhode Island) as well as through an 800 number (1-800-Allstate).
Allstate Plans ‘Aggressive Ramp-Up’ in Massachusetts
Now, with the opening of new offices, Allstate is expanding its business in earnest. The company says it is planning an “aggressive ramp-up” in coming years.
On Monday, Oct. 1, Allstate opened an office in North Andover, a suburb of Boston. It’s the company’s first brick-and-mortar office in Massachusetts in 25 years. At least two more offices are scheduled to open in the state before the end of the year.
“We just opened our first office in North Andover on Monday. And we have plans to open up at least two more offices through the end of 2012,” Allstate spokesman Chris Conner told Insurance Journal. “After a careful evaluation of Massachusetts’ managed competition, i.e., the deregulation, we determined that the regulatory atmosphere in Massachusetts is favorable to pursue a brick-and-mortar agency expansion. That’s where we are today.”
Recruiting Exclusive Agents
He said Allstate is also actively recruiting mid-level business professionals to become the company’s exclusive agents in Massachusetts. “We will continue what has so far been a very aggressive recruiting campaign to recruit insurance professionals, entrepreneurs, and mid-level, mid-career managers, into the opportunities to become Allstate exclusive agents,” the spokesman said.
“The way Allstate is structured,” the spokesman also explained, “our agents are actually independent contractors who have the benefit of owning economic interest in their books of business. So they are not technically Allstate employees but they do enter a contract with us to become Allstate exclusive agents.”
Currently, Allstate has around 1 percent of the total auto market in Massachusetts, insuring a little over 34,000 cars, the Allstate spokesman explained.
He added that opening brick-and-mortar offices in Massachusetts reflects Allstate’s confidence that it can continue to boost its market share. Allstate currently offers auto insurance, life insurance and a wide range of other financial service products in Massachusetts, he said.
However, Francis Mancini, CEO of the Massachusetts Association of Insurance Agents, suggested that Allstate and other recent entrants to Massachusetts’ auto insurance market have their work cut out for them. He noted that the insurers that were doing business in the state prior to managed competition still write most of the business in the state.
“We have 10 or 11 companies that began to write automobile insurance that didn’t write automobile insurance here before,” Mancini observed.
But a number of those companies were already writing other types of insurance in Massachusetts, he observed. “For example, Vermont Mutual offered property insurance here, and they just expanded to auto insurance. But some of the other new companies that have come here, like GEICO and Progressive, they don’t write other kinds of insurance,” Mancini said.
“So certainly, the managed competition has opened up the marketplace. But from the standpoint of market share, the companies that were doing business here prior to managed competition still write most of the business in the state, not the new companies,” Mancini said.
And independent insurance agents still write most of the auto insurance and most of the homeowners insurance as well, he said. “So, the managed competition is certainly offering consumers more choices but we believe the most attractive choices are those being offered by the independent agencies and the independent agents that were here before the managed competition began.”
Mancini also cautioned that in the mid-1980s, Allstate “just decided to get up and leave.”
“Whether they would do that again, I don’t know,” he said. “But if they’ve done it one time, I suspect they could do it again. So people that decide to write their insurance with Allstate, they should be prepared so that if the market goes down, Allstate may just get up and leave. They have a history of this in a lot of states for automobile and homeowners insurance.”
He also recalled how some of Allstate’s former exclusive agents started their own agency group when the company first pulled out back in 1987. “There were a number of agents — there may have been a couple of dozen — these agents had worked for Allstate and they started a group of independent agencies,” he said. “There were a number of them. They were called allMass agents.”
Some of these agents were able to maintain their customer base that may have otherwise gone to someplace else, Mancini observed, adding that some of these agencies still exist, though they are no longer called allMass.
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