Safeco had the itch to sell direct some years ago after hiring a Progressive guy for Personal Lines. It didn’t work out so well for them and they cut him loose and abandoned it or so we thought. Travelers recently started doing it and told their agents any auto business sold would refer the HO to agents. We are still waiting for our first referral for HO from them. I am not surprised at Progressive since they have been playing both sides for years.
That shows their lack of committment to agents, captive or independent. Looks like its time to give Encompass the boot out of our office. Been holding on with them and waiting for improvement, but obivously there is no commitment to the channel.
Their marketing reps keep saying they are committed to the Independent Agency system and meanwhile they are in these online sites to go around us in their quest for growth. It strikes me as odd that they will be in a site owned by a major competitor who will be collecting fees from them for brokering business with their company. I would imagine it will be less than paying a commission to an agent for doing the grunt work.
They won’t abandon the Answer platform. They have been taking sloppy seconds from other sources such as Insurance Noodle, and even from Nationwide, Arbella and other captives for years. Also, why reinvent the wheel when they can piggyback renting someone else’s website?
I wonder how the Allstate captive agents feel about them going around them and going direct. We represent Travelers & Safeco who have both had forays into selling direct and we will be having discussions with them about this approach. To have facilities owned by Allstate selling their products is not a good thing.
State Farm is their own worst enemy. Everyone has been chipping away at them since their pricing is not wonderful and they prefer to be in Financial Services. I just wrote one away from them for Home & Auto on a clean account and saved the customer $1,000.
Angry Agent: I’m no fan of Allstate but honestly you need to realize it is a smart business move. Consumers are changing and they shop online. Honestly they do !! and you must have strategies to use sell online or at least generate leads via the web. It isn’t a lack of commitment but diverfication of a business model and your comment is tired. If you start kicking out companies that use the net you won’t be selling with anyone in the next ten years. Do you honeslty think Travelers, The Hartford, Safeco or any other companyare not going to enter this space as well? If they don’t they will be left way behind. Consumers change and the great news is the agent model will always be successful and we will always get aquire customers. Spend your time figuring out how to integrate sales strategies with these carriers and not complaining about the wave that is coming
det3636. No doubt it is a smart move on their part. Not complaining at all. Consumers are much differenet then they used to be. Actually I think consumers really want all options from a carrier. Online, phone, walk-in, their choice du jour.
We are a coastal state and have had to deal with PML reductions, which already shrunk our book by 40%. Our state surpassed our PML reduction goals and we got little for it. That’s the “been hanging on” part.
This is really just the icing on the cake. I wouldn’t end a relationship on just this. We have plenty of markets.
This is as much about gaining on State Farm than it is about “serving the customer”. In today’s mindset big = good. There once was a time when carriers competed on quality and relationships and not just price alone. While Allstate, State Farm, Nationwide, Farmers, Progressive, GEICO and Liberty Mutual build their respective “Towers of Babel”, they leave their so-called customers to make their own coverage mistakes, after all, you can’t sue yourself for malpractice.
IT IS SO AMAZING TO SEE HOW ALLSTATE IS SWITCHING FROM BEING AN INSURANCE COMPANY TO BEING A BROKER OF INSURANCE FOR MANY OTHER COMPANIES, UNLESS THE STRATEGY HERE IS TO MAKE SURE ALLSTATE IS ALWAYS THE LOWEST PRICE FOR INSURANCE SHOPPERS WHICH IS NOT TRUE.
Hmmmmmm…. I wonder how the Allstate agents feel right now. Who is next? State Farm? Lets see, Nationwide, Liberty Mutual went to the Independent Agency system. Now Allstate has abandoned the independents and bought a cartoon company to sell their products. All I can say is Mayheim is at work at Allstate.
Sarah, I am an Independent agent and I don’t feel so good either to see many of my markets under this online scheme. It is one thing to sign up for an independently owned online service and quite another for the online service to be owned by a major insurance company who is a direct competitor of theirs. They will be cutting checks to Allstate for the broker fees etc. I wonder how they will like that and I also wonder about manipulation of rates to make Allstate look more competitive against them. They have been advertising for a while that a customer can save 400-500 dollars per year by going to them.
After 34 years in this business, I have decided that virtually all insurance companies can trace their origins to the world’s oldest profession..except the insurers are not as honest about what they are doing to agent and insured.
Years ago I did market finding consulting work for Answer Financial it was a great concept since they learned you need to represent a great many auto markets to capture each Insured that called in on the website. The insurance distribution system has expanded beyond CAPTIVE AGENTS.
This is great news for carriers that operate with Independent Agents!! I see many Allstate Agent’s saying good bye and saying hello to the Independent Agent world. THANKS ALLSTATE!!!!
Good luck to Esurance employees. Once Allstate gets hold of them they will demand a combined loss ratio of 85% like they do with their Allstate agents. Price will skyrocket and Allstate poor management will ruin them. Allstate tried the 800 Allstate to compete against agents and it failed just like every new idea they have had in the last 10 years.
Allstate will mess this up as they have everything else they get into ( they really believe their own advertising ). Look at Encompass, their Ind. agents and the trashing of the company agents. Not one agent with any since trusts anything they are told. Their claims service once the best is now below average. The main problem to many Chiefs (bean counters) and you know the rest.
I remember when Allstate and State Farm were almost the same size.
I could not agree more. The “chiefs” are only concerned about the size of their pocket books, the shareholders, and the board of directors. The could care less about the agents as well as the insureds. The “chiefs” seem to forget how the success of this company was formed….agent and the paying insureds. Allstate needs new leadership ASAP!
I hope that Allstate doesn’t get rid of Erin Esurance, their spokes-toon. But if they keep her, they have to go back to her earlier iteration where she was right up there with Kim Possible and Flo.
What can I say? Advertising works. But bad advertising works faster.
They all have bad advertising. Some of the worst ones are the Nationwide silly ads and Farmers University. They are playing to the dumbed down society we have and cater to the Obama voters who have little common sense and blindly accept anything put out there.
When I started in this business in 1982 Allstate was working three sides of the fence then: Captive Agents – Independent Agents – Sears Employee Agents (direct?). Over the years my overall impression of Allstate has been that their customers have been paying a premium without getting insurance (or at least not value) because of some of their documented claims practices.
When I started out I was captive to Farmers for seven years. Now I’m working on three sides of them – Parent co. Zurich: Subsidiaries Foremost and Bristol West/Coast National. On the minus side being affiliated with some real insurance companies doesn’t appear to have affected Farmers antics or treatment of their agency force. On the plus side it also hasn’t affected the operations of their subsidiaries. They still throw agent up against the wall to see if they stick.
Likewise, I don’t expect to see any changes in Allstate operations. Their Independent Agents customers apear to be treated better than their Captive Agents customers, but I’m on the outside looking in.
All companies support the almighty dollar and only the almighty dollar. The problem is when they use the money they earn from agents to promote their online sales and don’t put any money back into supporting the agents. That is when you, as an agent, are up the creek. When a company can balance supporting online sales and their agent force you have a winning combination for both the carriers and their agents.
I would suggest that Allstate independents and captives read over their contracts very well. Can this new hybrid cross sell other lines of insurance? What happens when a current client calls the new direct writer and gets a cheaper rate?
I think that the time is coming or is here for independents to look for companies that truly want to be a partner with them.
That’s always an iffy proposition – It has been my expereince that the carrier say one thing, and then tomorrow do another. When it comes down to agents verses each other, the carriers always follow each other, like dogs with their sniffers sniffing you-know-what on each other.
I am an agent at State Farm and a friend of mine who is a second generation Allstate Agent, just emailed me to have lunch next week. I think he wants to see what he needs to do to come over to State Farm as an agent. At State Farm, our internet prescence is completely set up to support the value of the agent and have us fed the leads that come in from Statefarm.com or from other lead aggregators. This will be interesting to see how the Allstate Agent handles this brave new world.
I agree Wayne. Marketing Reps either are kept in the dark or they are lying to us when they say they are committed to the agency distribution system and then sign up for online sales. We have yet to get a referral from a company to write a HO after they wrote a Personal Auto online. Insureds could get a better deal with companion credits if both lines were written. People who purchase Auto online don’t have a clue on what they need and often make poor buying decision from an order taker and then wonder why their coverage was inadequate or the coverage is not there in case of an accident. Agents give good advice and luckily our customers are given good service and advice and we try to round accounts. None of that is available online.
I ABSOLUTELY LOVE SOME OF THE BELOW COMMENTS—-SLOPPY SECONDS, CARTOON COMPANY AND THE WORLD’S OLDEST PROFESSION. SOME OF US OUGHT TO BE WRITERS FOR JAY LENO!!!!!
The majority of the carriers out their are pursuing this channel, and yes, funded by the hard work of their agency plants. They take a walk on the wild side for some side action, and what they discover is something they should’ve known all along: That that direct-channel stuff is as disloyal as the carriers, that they lie and misrepresent the risk, that instead of it being a nice single-family owner-occupied house, its a four-family dump with cracked sidewalks, knob-and-tube wiring and a moss covered roof that needed replacing fifteen years ago.
The internet is the “red light district” of insurance sales, with the majority of sales being the clowns IAs, when they are stuck with them, wish they could tell them to get lost. They are loyal to one thing and one thing only – the cheapest price – they will lie about their use (It might even be a cab posing as a family auto), and they will leave as quickly as they came.
I agree with Wayne, however, our carriers are using our hard-placed money to cheat on us, expecting that we’ll always be there while they have this wanton love affair with their online floozies at our expense.
It is my opinion that with our aging population of babyboomers ill equipped to retire on dwindling 401k’s & underfunded pensions, facing higher unemployment & fewer tax payers, people are going to find their smart phones & internet access as a luxury many just won’t be able to afford to continue and there will be an increasing # of cash & carry customers who depend on agents for access to insurance markets. It is shortsided of the carriers to think they won’t need agents. Of course they will terminate many agents only to realize later that it will be a mistaken strategy.
All of the comments listed above are telling. They are telling in that many agents out there are stuck in a pattern of defending the past instead of adapting to change and helping shape the future.
Imagine if you’re a company; Allstate, Farmers, whoever. And you’re in charge. You have to answer to shareholders, employees, your agents, customers, everyone. And here’s what you’re facing: an evolving insurance marketplace with customers who are choosing a different way to buy products and services. Then you realize your company is screwed because your distribution model is based solely on agency business.
But your real problem is that your agents leave growth stuck in limbo if they aren’t willing to evolve how they attract and sell to new prospects. THIS is the crux of the issue. Think of it like Blockbuster, the movie rental giant who looked at Netflix and Redbox as annoying “red light district” competitors who took only the crap that was left over. By the time Blockbuster realized it had to change its business model, it was too late and last year they filed chapter 11.
Allstate, State Farm and the like will probably have the power to survive, but my worry falls to the smaller regionals in the IA channel who haven’t dropped 12 cents into infrastructure and technology but call themselves “dedicated to agents.” Like that lipservice matters if they can’t compete long term and go under.
I think there are more sinister forces at work on this deal. The companies who signed up for online quotes with Esurance or Answer Financial have to be squirming a little knowing that Allstate will now know what they are doing on rates for every single quote. It will be easy to tweak their rates to look better on quotes. Talk about an unfair advantage not to mention the database to solicit other lines. It is one thing to sign up for online quoting with an independent company and quite another with one owned by a major competitor. This deal doesn’t pass the smell test and the good hands people cannot be trusted to run an honest site.
The internet is here to stay. Indepencent agents need to set up an online quoting service that directs the customer to the closest independent agent. The independent agent needs to be able to respond to requests for an internet quote 24/7.
We know the internet is here to stay and a certain number of geek prospects like to explore it to pay bills and get quotes. In this deal, a major insurance company will own the online quoting system and can game it to their advantage. Online quoting systems should not be in the hands of an independent online service to make sure all the competing carriers get a fair shake on quotes. If I were one of the carriers signed up for this, I think I would be uneasy about Allstate knowing what my rates were on quotes.
I disagree with the idea that “technology” is the sole driver of this trend. Going direct isn’t anything new, “Government Employees” has been doing it from the get-go. (No pun intended, and who’d by insurance from government employees anyway, think DMV.)
The problem here is how the industry has oriented the professional service of insurance, and made it into a commodity for a short term gain in sales. The problem here is the loss of quality – in advice and service, in development of proper coverage and risk management going forward.
And, yes, the direct channel is the “red light district” of insurance sales, even more so than bucket shops because most of buyers (Johns) don’t want to know who they are buying from, as long as it is quick, cheap and anonymous.
What is the retention of direct-written business verses that of agents either captive or independent? What is the demographic – are they predominately young & broke? Are they bigger risk takers? Are they honest in light of the fact that there are no front line field nderwriters, ie. agents?
We know the answers – that the retention and profitability is far below that of agents, but it seems all the big names are chasing this junkie business, the same business that if an IA was writing it, they would be summarily dumped and have their conttract rescinded for writing such a book.
I love your post as it is obvious you very knowledgeable and really good at what you do. On this post you make great points but I think your premise about the red light district (I know you commented on some else) is a little off. The facts are GEICO boast a retention rate in the 90’s and USAA retention rate is in the high 90’s (I know they are unique) and even though the leads are coming in via a call or the net the risks are still underwritten. I know this could be a sin saying but risk are risks no matter how they get through the door and they are underwritten and priced accordingly We all know agent underwriters relationships help place risk but at the end of the day we get a few exceptions or accommodations but not as many as we think. I agree with you in regards to proper coverage and counseling. (that is what we do and how we differentiate ourselves from direct writers) I would ask everyone to ask themselves this simple question if direct to consumer is the “red light district” how come companies that do it have very good results and more companies are trying to get in. Think about it… Direct isn’t just the internet it is call in, (GEICO, USAA, EST) internet, (several companies including the above) affinity (Travelers, Liberty etc) and direct response… These companies make money and often the customers are happy too. It is that simple the real issue is what you said in your post and that is how do your differentiate from them. People talking to people stand a great chance of winning. People plus the integration of technology wins winner !!
Says Esurance is the third largest provider of “online quotes”. Purchase price – $700 million plus “tangible book value” whatever that is (1 times revenue, 2 times revenue?)In any event, $300 million is very low ROI based on the amount of advertising being paid for. I’m not shaking in my boots. Based on those numbers, they’re doing a lot of quoting, but among the largest IAs out there, they pale in size for two combined national businesses who have been harrassing the masses with the volume of ads. Maybe Allstate sees something there, but I think if you got 1,700 (number of employees) mediocre agents together, they surely can outproduce the values talked about here.
I left Allstate after 40 plus years.Higher management years ago came up thru the ranks. We left Sears in 1994 but brought a lot of Sears management along. Tom Wilson came from Sears never spent any time in the field. His predecessor also came from Sears. We lost a lot of good people due to the mind set of the Sears way of doing things.
He was better as President on 24 until he got shot. Then, he was good on The Unit while it lasted. I guess the Allstate ads kept him in pocket change until he could line up another role.
Poor Erin. By the time Allstate retools and starts the new advertising, they may have another out of work actor take over the spots. Probably won’t be Dennis Haysbert. They need another cute young thing to appeal to the young geeks who will be the online purchasers. Perhaps the cute little geek girl on CSI Los Angeles would be a good fit. Personally, I think they overpaid for these two online quoting sites. This may backfire on them if Esurance & Answer Financial breached their contract by selling to an insurance company and the markets pull out of it. Time will tell.
Better than pick your own price Flo as well. All of these people have goofy ads designed to appeal to our dumbed down society. The only intelligent ad I have seen recently is Liberty Mutual preaching personal responsibility.
Usually, when there is a buyout or merger with this much money changing hands, a lot of jobs are lost in the process. I would bet that a lot of Esurance and Answer Financial people will lose out and be replaced by Allstate geeks. Perhaps they can hook up with GEICO or Progressive or 21st Century and keep doing the same thing.
I think it’s a smart move to reach a younger, more monoline auto customer set than the captives have the zest and desire to serve. The captives will continue to serve in the role of bundlers, targeting those consumers with multi-line needs.
I’m an agent on the health/life side so you can imagine what I’ve been facing. I have to say, however, that I just bought my auto insurance online with Geico. It was a Class A experience. My friend was just in an accident where the “at fault” party had Geico. She’s not in our business, but said it was the most professional claims process she’s ever been through. So much so, she’s switching to online Geico. She is just waiting for Homeowners to go online. So, yes, online is here to stay. Brick and Mortar is dead and consumers will no longer want to pay agents (on my side anyway) enough to split with home office and pay their overhead. Ehealthinsurance, ehealth and esurance are way ahead of the game.
Brick and mortar are here to stay. Peddlers abound, but try to buy a complicated commercial program from some dunce with coffee cups taped to the side of her head at a call center.
Also, it is just a marketing ploy. Whether using a computer, telephone or telepathy, you are still interacting with a person seated in a building somewhere. With a direct-resposne company, you are speaking to an anonymous person, and never the same one twice. They are there “working for the weekend”; the turn-over is horrendous, and their knowledge base questionnable at best.
I wouldn’t go to a doctor who I could never meet, who didn’t come recommended, and didn’t have an MD after his name. Why would you gamble your future financial security on some faceless clerk with no credentials after their name?
Repairing car damage is easy. Covering your liability claim when you find out after the fact that your cheap insurance provided for the basic liability limit only and your claim is going over, that would be your mistake and by the way, you can’t sue yourself for being an idiot.
Well it looks like that Mayhem guy has taken over as CEO of Allstate. If you are going to buy a company, at least make it a company who doesnt use cartoon characters or lizards as their spokesperson. Its catchy but also childish.
The Kiss of Death to Allstate. (at least my opinion)
The problem Sarah is that we are living in a more dumbed down society and the younger generation who are not being educated in our schools respond to cartoon characters since that is the level they are operating on. What is dumb to you and I is just fine with them. I think Dennis Haysbert will be sent packing and we will have to be subjected to all this cartoon nonsense from now on. Many of the markets using Esurance online rating service may be pulling out due to a breach in their contract about selling to another insurance company who can game the system.
As a company, this will make sense to Allstate’s bottom line. Look at the growth at Geico and Progressive. Their platform is online sales and NOT a strong agency channel. I see this growth continuing for not only Auto Insurance, but Home, Health, Life and even small Business Insurance. This trend will eventually level off and there will be a percentage that will always prefer an agent and those that prefer to purchase insurance online.
Remember when you talked to a Travel Agent to book and plan a vacation? A similar thing is happening to insurance, its just taking a little but longer due to the strong power of the Agents in place.
At what cost? Surely their expense with IAs is the measily 10% they pay, which is the lowest percentage out of any IA carrier. They are typiacally the carrier of last resort for IAs.
If Progressive paid a competitive commission, and quite frankly, even if they didn’t, but spent the same hundreds of millions promoting their brand as an IA, not only would their closing ratio be higher, they’d have a higher quality book to boot.
Progressive is far too greedy to pay the IA competitive commissions. We have a substantial volume with them but it is mostly the problem children that the other standards won’t write. They will write most anything for a buck. Having said that, at times, their preferred rates are competitive. Now, they are trying to do HO business. That is the channel they need the IA’s on since the phone answerers don’t have a clue. Their contingency sucks because it is largely based on PIF growth rather than premiums and they have a separate contract for Commercial Auto so we can’t combine volume. Hard to come out on it without being a big hitter.
In my opinion, Allstate would be better off focusing on their agent channel and Compass business rather than brokering all of their competitors products. We’ll see if they can be effective at “being everything to everyone”. I think the new upcoming mlm P&C model is really going to take a nice chunk of the brokered independent business.
Ex, You make some good points. As an independent who represents several of the other markets, I think they are having second thoughts about participation in this online scheme with it being owned by one of their competitors. I have heard that some of them think Esurance and Answer Financial breached their contract by selling to Allstate. If a few major players like Travelers, Safeco and Unitrin/Kemper pull out, the billion dollar investment may not look so good to the good hands people.
Just reading the 5/27/11 issue of The Standard. In a report by comScore, theys state that industry-wide 37 million quotes were given online, and that 2.9 million policies were written. That is a paltry number when considering the effort verses closed business ratio. They also report that the neither the volume nor the closing ratio has increase since 2008.
This ought to be an eye-opener to any agent considering investing in an internet marketing scheme such as has been heavily advertised in this publication. You’ll spend all of your staff’s time quoting policy for internet driven prospects, for a less than 1% closing ratio, and that is not very “astonishing”.
Can you link to that article? I would like to see it. Also I wonder what percentage the quotes are from an automated system such as GEICO or Progressive (not touched by a human) and what percentage are from an online lead where a person calls them to get the info to quote.
I think the theory of large numbers comes into play on this scheme. They figure the system will do the work without any underwriting and any policies written will be a plus. The geeks who go online all the time have no loyalty and will switch for a small savings each year. They are also not given insurance advice and many don’t realize they need other types of insurance besides Auto Insurance. The thing that troubles me is that Allstate will own this operation and will use it to their advantage and know what their competition is doing on all quotes. Kind of a home field advantage, don’t you think?
Great move by Allstate here, thank you for posting it. They need to get more involved in the online insurance if they want a hope to stay alive in this economy. Allstate is a great company, but like many nationwide businesses it can have some weak spots. I was surfing the internet and I found this site where people can vent about poor customer service or products they received… it can get really funny. I would recommend you to check it out here: http://ventme.com/companies/view/125
If this was such a great move Joseph, why do you think there is a rebellion going on with Allstate agents? Ask an Allstate agent what they think of their company leadership. Morale is very low and they are forming a union to deal with management. Kind of a drastic action, but they aren’t getting anywhere through the normal channels. Many are looking to get out and get into Independent agencies and Allstate may be left with the geek squad selling over the internet.
I currently have insurance and just heard about this. I’m getting quotes from other insurance companies now. Probably will switch to Progressive. I’m paid with esurance through May 2012, but will be canceling as soon as I can get another policy elsewhere setup.
This is a crying shame. Esurance was the only insurance company that I ever felt as if I was actually a customer. I’ve had them for quite some time now and have had great experiences across the board. Allstate is a terrible insurance company and I never want to be one of their customers. They’re going to wreck esurance. I won’t be around for it! This is a shame because Esurance was such a great option for so many people.
I was hit by a driver carrying Allstate insurance 5 years ago. As the victim, I still to this day cannot believe how poorly Allstate treated me. Nothing but a nasty, huge, old-fashioned company. Too much business, not enough innovation. I’m upset, but I’m getting myself out of the situation. I suggest other esurance policyholders do the same. It’s not esurance anymore.
I will be curious to see if any of Allstate’s key competitors abandon the Answer platform going forward.
Safeco had the itch to sell direct some years ago after hiring a Progressive guy for Personal Lines. It didn’t work out so well for them and they cut him loose and abandoned it or so we thought. Travelers recently started doing it and told their agents any auto business sold would refer the HO to agents. We are still waiting for our first referral for HO from them. I am not surprised at Progressive since they have been playing both sides for years.
That shows their lack of committment to agents, captive or independent. Looks like its time to give Encompass the boot out of our office. Been holding on with them and waiting for improvement, but obivously there is no commitment to the channel.
Their marketing reps keep saying they are committed to the Independent Agency system and meanwhile they are in these online sites to go around us in their quest for growth. It strikes me as odd that they will be in a site owned by a major competitor who will be collecting fees from them for brokering business with their company. I would imagine it will be less than paying a commission to an agent for doing the grunt work.
I know I would
They won’t abandon the Answer platform. They have been taking sloppy seconds from other sources such as Insurance Noodle, and even from Nationwide, Arbella and other captives for years. Also, why reinvent the wheel when they can piggyback renting someone else’s website?
This seems like a smart move, entering into the online insurance business via M&A instead of reinventing the wheel.
I wonder how the Allstate captive agents feel about them going around them and going direct. We represent Travelers & Safeco who have both had forays into selling direct and we will be having discussions with them about this approach. To have facilities owned by Allstate selling their products is not a good thing.
This is as much about gaining on State Farm. In today’s mindset big = good.
State Farm is their own worst enemy. Everyone has been chipping away at them since their pricing is not wonderful and they prefer to be in Financial Services. I just wrote one away from them for Home & Auto on a clean account and saved the customer $1,000.
Angry Agent: I’m no fan of Allstate but honestly you need to realize it is a smart business move. Consumers are changing and they shop online. Honestly they do !! and you must have strategies to use sell online or at least generate leads via the web. It isn’t a lack of commitment but diverfication of a business model and your comment is tired. If you start kicking out companies that use the net you won’t be selling with anyone in the next ten years. Do you honeslty think Travelers, The Hartford, Safeco or any other companyare not going to enter this space as well? If they don’t they will be left way behind. Consumers change and the great news is the agent model will always be successful and we will always get aquire customers. Spend your time figuring out how to integrate sales strategies with these carriers and not complaining about the wave that is coming
det3636. No doubt it is a smart move on their part. Not complaining at all. Consumers are much differenet then they used to be. Actually I think consumers really want all options from a carrier. Online, phone, walk-in, their choice du jour.
We are a coastal state and have had to deal with PML reductions, which already shrunk our book by 40%. Our state surpassed our PML reduction goals and we got little for it. That’s the “been hanging on” part.
This is really just the icing on the cake. I wouldn’t end a relationship on just this. We have plenty of markets.
This is as much about gaining on State Farm than it is about “serving the customer”. In today’s mindset big = good. There once was a time when carriers competed on quality and relationships and not just price alone. While Allstate, State Farm, Nationwide, Farmers, Progressive, GEICO and Liberty Mutual build their respective “Towers of Babel”, they leave their so-called customers to make their own coverage mistakes, after all, you can’t sue yourself for malpractice.
IT IS SO AMAZING TO SEE HOW ALLSTATE IS SWITCHING FROM BEING AN INSURANCE COMPANY TO BEING A BROKER OF INSURANCE FOR MANY OTHER COMPANIES, UNLESS THE STRATEGY HERE IS TO MAKE SURE ALLSTATE IS ALWAYS THE LOWEST PRICE FOR INSURANCE SHOPPERS WHICH IS NOT TRUE.
Hmmmmmm…. I wonder how the Allstate agents feel right now. Who is next? State Farm? Lets see, Nationwide, Liberty Mutual went to the Independent Agency system. Now Allstate has abandoned the independents and bought a cartoon company to sell their products. All I can say is Mayheim is at work at Allstate.
Sarah, I am an Independent agent and I don’t feel so good either to see many of my markets under this online scheme. It is one thing to sign up for an independently owned online service and quite another for the online service to be owned by a major insurance company who is a direct competitor of theirs. They will be cutting checks to Allstate for the broker fees etc. I wonder how they will like that and I also wonder about manipulation of rates to make Allstate look more competitive against them. They have been advertising for a while that a customer can save 400-500 dollars per year by going to them.
After 34 years in this business, I have decided that virtually all insurance companies can trace their origins to the world’s oldest profession..except the insurers are not as honest about what they are doing to agent and insured.
Years ago I did market finding consulting work for Answer Financial it was a great concept since they learned you need to represent a great many auto markets to capture each Insured that called in on the website. The insurance distribution system has expanded beyond CAPTIVE AGENTS.
This is great news for carriers that operate with Independent Agents!! I see many Allstate Agent’s saying good bye and saying hello to the Independent Agent world. THANKS ALLSTATE!!!!
I think the Allstate agent has just met “mayhem”. Bye bye Allstate agent. Wow!
Do the math and it looks like $705,882 production per employee.
Not great.
Good luck to Esurance employees. Once Allstate gets hold of them they will demand a combined loss ratio of 85% like they do with their Allstate agents. Price will skyrocket and Allstate poor management will ruin them. Allstate tried the 800 Allstate to compete against agents and it failed just like every new idea they have had in the last 10 years.
Farmers Insurance is also serving all three segments since their purchases of Foremost, Bristol West and 21st Century.
Allstate will mess this up as they have everything else they get into ( they really believe their own advertising ). Look at Encompass, their Ind. agents and the trashing of the company agents. Not one agent with any since trusts anything they are told. Their claims service once the best is now below average. The main problem to many Chiefs (bean counters) and you know the rest.
I remember when Allstate and State Farm were almost the same size.
I could not agree more. The “chiefs” are only concerned about the size of their pocket books, the shareholders, and the board of directors. The could care less about the agents as well as the insureds. The “chiefs” seem to forget how the success of this company was formed….agent and the paying insureds. Allstate needs new leadership ASAP!
I hope that Allstate doesn’t get rid of Erin Esurance, their spokes-toon. But if they keep her, they have to go back to her earlier iteration where she was right up there with Kim Possible and Flo.
What can I say? Advertising works. But bad advertising works faster.
They all have bad advertising. Some of the worst ones are the Nationwide silly ads and Farmers University. They are playing to the dumbed down society we have and cater to the Obama voters who have little common sense and blindly accept anything put out there.
When I started in this business in 1982 Allstate was working three sides of the fence then: Captive Agents – Independent Agents – Sears Employee Agents (direct?). Over the years my overall impression of Allstate has been that their customers have been paying a premium without getting insurance (or at least not value) because of some of their documented claims practices.
When I started out I was captive to Farmers for seven years. Now I’m working on three sides of them – Parent co. Zurich: Subsidiaries Foremost and Bristol West/Coast National. On the minus side being affiliated with some real insurance companies doesn’t appear to have affected Farmers antics or treatment of their agency force. On the plus side it also hasn’t affected the operations of their subsidiaries. They still throw agent up against the wall to see if they stick.
Likewise, I don’t expect to see any changes in Allstate operations. Their Independent Agents customers apear to be treated better than their Captive Agents customers, but I’m on the outside looking in.
All companies support the almighty dollar and only the almighty dollar. The problem is when they use the money they earn from agents to promote their online sales and don’t put any money back into supporting the agents. That is when you, as an agent, are up the creek. When a company can balance supporting online sales and their agent force you have a winning combination for both the carriers and their agents.
I would suggest that Allstate independents and captives read over their contracts very well. Can this new hybrid cross sell other lines of insurance? What happens when a current client calls the new direct writer and gets a cheaper rate?
I think that the time is coming or is here for independents to look for companies that truly want to be a partner with them.
That’s always an iffy proposition – It has been my expereince that the carrier say one thing, and then tomorrow do another. When it comes down to agents verses each other, the carriers always follow each other, like dogs with their sniffers sniffing you-know-what on each other.
I am an agent at State Farm and a friend of mine who is a second generation Allstate Agent, just emailed me to have lunch next week. I think he wants to see what he needs to do to come over to State Farm as an agent. At State Farm, our internet prescence is completely set up to support the value of the agent and have us fed the leads that come in from Statefarm.com or from other lead aggregators. This will be interesting to see how the Allstate Agent handles this brave new world.
Only until they are involved with a merger or acquisition. The insurance industry is monoplizing by consolidating into fewer but larger companies.
I agree Wayne. Marketing Reps either are kept in the dark or they are lying to us when they say they are committed to the agency distribution system and then sign up for online sales. We have yet to get a referral from a company to write a HO after they wrote a Personal Auto online. Insureds could get a better deal with companion credits if both lines were written. People who purchase Auto online don’t have a clue on what they need and often make poor buying decision from an order taker and then wonder why their coverage was inadequate or the coverage is not there in case of an accident. Agents give good advice and luckily our customers are given good service and advice and we try to round accounts. None of that is available online.
I ABSOLUTELY LOVE SOME OF THE BELOW COMMENTS—-SLOPPY SECONDS, CARTOON COMPANY AND THE WORLD’S OLDEST PROFESSION. SOME OF US OUGHT TO BE WRITERS FOR JAY LENO!!!!!
The majority of the carriers out their are pursuing this channel, and yes, funded by the hard work of their agency plants. They take a walk on the wild side for some side action, and what they discover is something they should’ve known all along: That that direct-channel stuff is as disloyal as the carriers, that they lie and misrepresent the risk, that instead of it being a nice single-family owner-occupied house, its a four-family dump with cracked sidewalks, knob-and-tube wiring and a moss covered roof that needed replacing fifteen years ago.
The internet is the “red light district” of insurance sales, with the majority of sales being the clowns IAs, when they are stuck with them, wish they could tell them to get lost. They are loyal to one thing and one thing only – the cheapest price – they will lie about their use (It might even be a cab posing as a family auto), and they will leave as quickly as they came.
I agree with Wayne, however, our carriers are using our hard-placed money to cheat on us, expecting that we’ll always be there while they have this wanton love affair with their online floozies at our expense.
It is my opinion that with our aging population of babyboomers ill equipped to retire on dwindling 401k’s & underfunded pensions, facing higher unemployment & fewer tax payers, people are going to find their smart phones & internet access as a luxury many just won’t be able to afford to continue and there will be an increasing # of cash & carry customers who depend on agents for access to insurance markets. It is shortsided of the carriers to think they won’t need agents. Of course they will terminate many agents only to realize later that it will be a mistaken strategy.
All of the comments listed above are telling. They are telling in that many agents out there are stuck in a pattern of defending the past instead of adapting to change and helping shape the future.
Imagine if you’re a company; Allstate, Farmers, whoever. And you’re in charge. You have to answer to shareholders, employees, your agents, customers, everyone. And here’s what you’re facing: an evolving insurance marketplace with customers who are choosing a different way to buy products and services. Then you realize your company is screwed because your distribution model is based solely on agency business.
But your real problem is that your agents leave growth stuck in limbo if they aren’t willing to evolve how they attract and sell to new prospects. THIS is the crux of the issue. Think of it like Blockbuster, the movie rental giant who looked at Netflix and Redbox as annoying “red light district” competitors who took only the crap that was left over. By the time Blockbuster realized it had to change its business model, it was too late and last year they filed chapter 11.
Allstate, State Farm and the like will probably have the power to survive, but my worry falls to the smaller regionals in the IA channel who haven’t dropped 12 cents into infrastructure and technology but call themselves “dedicated to agents.” Like that lipservice matters if they can’t compete long term and go under.
I think there are more sinister forces at work on this deal. The companies who signed up for online quotes with Esurance or Answer Financial have to be squirming a little knowing that Allstate will now know what they are doing on rates for every single quote. It will be easy to tweak their rates to look better on quotes. Talk about an unfair advantage not to mention the database to solicit other lines. It is one thing to sign up for online quoting with an independent company and quite another with one owned by a major competitor. This deal doesn’t pass the smell test and the good hands people cannot be trusted to run an honest site.
The internet is here to stay. Indepencent agents need to set up an online quoting service that directs the customer to the closest independent agent. The independent agent needs to be able to respond to requests for an internet quote 24/7.
We know the internet is here to stay and a certain number of geek prospects like to explore it to pay bills and get quotes. In this deal, a major insurance company will own the online quoting system and can game it to their advantage. Online quoting systems should not be in the hands of an independent online service to make sure all the competing carriers get a fair shake on quotes. If I were one of the carriers signed up for this, I think I would be uneasy about Allstate knowing what my rates were on quotes.
I disagree with the idea that “technology” is the sole driver of this trend. Going direct isn’t anything new, “Government Employees” has been doing it from the get-go. (No pun intended, and who’d by insurance from government employees anyway, think DMV.)
The problem here is how the industry has oriented the professional service of insurance, and made it into a commodity for a short term gain in sales. The problem here is the loss of quality – in advice and service, in development of proper coverage and risk management going forward.
And, yes, the direct channel is the “red light district” of insurance sales, even more so than bucket shops because most of buyers (Johns) don’t want to know who they are buying from, as long as it is quick, cheap and anonymous.
What is the retention of direct-written business verses that of agents either captive or independent? What is the demographic – are they predominately young & broke? Are they bigger risk takers? Are they honest in light of the fact that there are no front line field nderwriters, ie. agents?
We know the answers – that the retention and profitability is far below that of agents, but it seems all the big names are chasing this junkie business, the same business that if an IA was writing it, they would be summarily dumped and have their conttract rescinded for writing such a book.
Ins Pro
I love your post as it is obvious you very knowledgeable and really good at what you do. On this post you make great points but I think your premise about the red light district (I know you commented on some else) is a little off. The facts are GEICO boast a retention rate in the 90’s and USAA retention rate is in the high 90’s (I know they are unique) and even though the leads are coming in via a call or the net the risks are still underwritten. I know this could be a sin saying but risk are risks no matter how they get through the door and they are underwritten and priced accordingly We all know agent underwriters relationships help place risk but at the end of the day we get a few exceptions or accommodations but not as many as we think. I agree with you in regards to proper coverage and counseling. (that is what we do and how we differentiate ourselves from direct writers) I would ask everyone to ask themselves this simple question if direct to consumer is the “red light district” how come companies that do it have very good results and more companies are trying to get in. Think about it… Direct isn’t just the internet it is call in, (GEICO, USAA, EST) internet, (several companies including the above) affinity (Travelers, Liberty etc) and direct response… These companies make money and often the customers are happy too. It is that simple the real issue is what you said in your post and that is how do your differentiate from them. People talking to people stand a great chance of winning. People plus the integration of technology wins winner !!
Says Esurance is the third largest provider of “online quotes”. Purchase price – $700 million plus “tangible book value” whatever that is (1 times revenue, 2 times revenue?)In any event, $300 million is very low ROI based on the amount of advertising being paid for. I’m not shaking in my boots. Based on those numbers, they’re doing a lot of quoting, but among the largest IAs out there, they pale in size for two combined national businesses who have been harrassing the masses with the volume of ads. Maybe Allstate sees something there, but I think if you got 1,700 (number of employees) mediocre agents together, they surely can outproduce the values talked about here.
I left Allstate after 40 plus years.Higher management years ago came up thru the ranks. We left Sears in 1994 but brought a lot of Sears management along. Tom Wilson came from Sears never spent any time in the field. His predecessor also came from Sears. We lost a lot of good people due to the mind set of the Sears way of doing things.
Does this mean Erin is out of a job. She can come work for me.
She is in “good hands” now.
Apparently Dennis Haysbert wasnt cute enough to sell insurance on TV
He was better as President on 24 until he got shot. Then, he was good on The Unit while it lasted. I guess the Allstate ads kept him in pocket change until he could line up another role.
But I thought I could trust that deep-voiced-sympathetic-actor-guy that told me I was in good hands!
But what about Erin? http://testv1.cseinsurance.com/blog/2011/05/shocking-layoff-hits-insurance-industry/
Poor Erin. By the time Allstate retools and starts the new advertising, they may have another out of work actor take over the spots. Probably won’t be Dennis Haysbert. They need another cute young thing to appeal to the young geeks who will be the online purchasers. Perhaps the cute little geek girl on CSI Los Angeles would be a good fit. Personally, I think they overpaid for these two online quoting sites. This may backfire on them if Esurance & Answer Financial breached their contract by selling to an insurance company and the markets pull out of it. Time will tell.
Gotta love that pink hair and wasp waist. The stuff fantasies are made of. Much better than JK Simmons old bald head in Farmers ads.
Better than pick your own price Flo as well. All of these people have goofy ads designed to appeal to our dumbed down society. The only intelligent ad I have seen recently is Liberty Mutual preaching personal responsibility.
no worries, I’m sure Erin will have plenty of company. Only 1 day into the deal & they are already making changes…
Usually, when there is a buyout or merger with this much money changing hands, a lot of jobs are lost in the process. I would bet that a lot of Esurance and Answer Financial people will lose out and be replaced by Allstate geeks. Perhaps they can hook up with GEICO or Progressive or 21st Century and keep doing the same thing.
I think it’s a smart move to reach a younger, more monoline auto customer set than the captives have the zest and desire to serve. The captives will continue to serve in the role of bundlers, targeting those consumers with multi-line needs.
I’m an agent on the health/life side so you can imagine what I’ve been facing. I have to say, however, that I just bought my auto insurance online with Geico. It was a Class A experience. My friend was just in an accident where the “at fault” party had Geico. She’s not in our business, but said it was the most professional claims process she’s ever been through. So much so, she’s switching to online Geico. She is just waiting for Homeowners to go online. So, yes, online is here to stay. Brick and Mortar is dead and consumers will no longer want to pay agents (on my side anyway) enough to split with home office and pay their overhead. Ehealthinsurance, ehealth and esurance are way ahead of the game.
Brick and mortar are here to stay. Peddlers abound, but try to buy a complicated commercial program from some dunce with coffee cups taped to the side of her head at a call center.
Also, it is just a marketing ploy. Whether using a computer, telephone or telepathy, you are still interacting with a person seated in a building somewhere. With a direct-resposne company, you are speaking to an anonymous person, and never the same one twice. They are there “working for the weekend”; the turn-over is horrendous, and their knowledge base questionnable at best.
I wouldn’t go to a doctor who I could never meet, who didn’t come recommended, and didn’t have an MD after his name. Why would you gamble your future financial security on some faceless clerk with no credentials after their name?
Repairing car damage is easy. Covering your liability claim when you find out after the fact that your cheap insurance provided for the basic liability limit only and your claim is going over, that would be your mistake and by the way, you can’t sue yourself for being an idiot.
Well it looks like that Mayhem guy has taken over as CEO of Allstate. If you are going to buy a company, at least make it a company who doesnt use cartoon characters or lizards as their spokesperson. Its catchy but also childish.
The Kiss of Death to Allstate. (at least my opinion)
Good Job! Mayhem.
The problem Sarah is that we are living in a more dumbed down society and the younger generation who are not being educated in our schools respond to cartoon characters since that is the level they are operating on. What is dumb to you and I is just fine with them. I think Dennis Haysbert will be sent packing and we will have to be subjected to all this cartoon nonsense from now on. Many of the markets using Esurance online rating service may be pulling out due to a breach in their contract about selling to another insurance company who can game the system.
As a company, this will make sense to Allstate’s bottom line. Look at the growth at Geico and Progressive. Their platform is online sales and NOT a strong agency channel. I see this growth continuing for not only Auto Insurance, but Home, Health, Life and even small Business Insurance. This trend will eventually level off and there will be a percentage that will always prefer an agent and those that prefer to purchase insurance online.
Remember when you talked to a Travel Agent to book and plan a vacation? A similar thing is happening to insurance, its just taking a little but longer due to the strong power of the Agents in place.
75% of Progressive sales are IA, not internet.
Where has their growth been?
At what cost? Surely their expense with IAs is the measily 10% they pay, which is the lowest percentage out of any IA carrier. They are typiacally the carrier of last resort for IAs.
If Progressive paid a competitive commission, and quite frankly, even if they didn’t, but spent the same hundreds of millions promoting their brand as an IA, not only would their closing ratio be higher, they’d have a higher quality book to boot.
Progressive is far too greedy to pay the IA competitive commissions. We have a substantial volume with them but it is mostly the problem children that the other standards won’t write. They will write most anything for a buck. Having said that, at times, their preferred rates are competitive. Now, they are trying to do HO business. That is the channel they need the IA’s on since the phone answerers don’t have a clue. Their contingency sucks because it is largely based on PIF growth rather than premiums and they have a separate contract for Commercial Auto so we can’t combine volume. Hard to come out on it without being a big hitter.
In my opinion, Allstate would be better off focusing on their agent channel and Compass business rather than brokering all of their competitors products. We’ll see if they can be effective at “being everything to everyone”. I think the new upcoming mlm P&C model is really going to take a nice chunk of the brokered independent business.
Ex, You make some good points. As an independent who represents several of the other markets, I think they are having second thoughts about participation in this online scheme with it being owned by one of their competitors. I have heard that some of them think Esurance and Answer Financial breached their contract by selling to Allstate. If a few major players like Travelers, Safeco and Unitrin/Kemper pull out, the billion dollar investment may not look so good to the good hands people.
Just reading the 5/27/11 issue of The Standard. In a report by comScore, theys state that industry-wide 37 million quotes were given online, and that 2.9 million policies were written. That is a paltry number when considering the effort verses closed business ratio. They also report that the neither the volume nor the closing ratio has increase since 2008.
This ought to be an eye-opener to any agent considering investing in an internet marketing scheme such as has been heavily advertised in this publication. You’ll spend all of your staff’s time quoting policy for internet driven prospects, for a less than 1% closing ratio, and that is not very “astonishing”.
Can you link to that article? I would like to see it. Also I wonder what percentage the quotes are from an automated system such as GEICO or Progressive (not touched by a human) and what percentage are from an online lead where a person calls them to get the info to quote.
I think the theory of large numbers comes into play on this scheme. They figure the system will do the work without any underwriting and any policies written will be a plus. The geeks who go online all the time have no loyalty and will switch for a small savings each year. They are also not given insurance advice and many don’t realize they need other types of insurance besides Auto Insurance. The thing that troubles me is that Allstate will own this operation and will use it to their advantage and know what their competition is doing on all quotes. Kind of a home field advantage, don’t you think?
I am old school and read the paper version. Their web adress is http://www.spcpub.com
Great move by Allstate here, thank you for posting it. They need to get more involved in the online insurance if they want a hope to stay alive in this economy. Allstate is a great company, but like many nationwide businesses it can have some weak spots. I was surfing the internet and I found this site where people can vent about poor customer service or products they received… it can get really funny. I would recommend you to check it out here: http://ventme.com/companies/view/125
If this was such a great move Joseph, why do you think there is a rebellion going on with Allstate agents? Ask an Allstate agent what they think of their company leadership. Morale is very low and they are forming a union to deal with management. Kind of a drastic action, but they aren’t getting anywhere through the normal channels. Many are looking to get out and get into Independent agencies and Allstate may be left with the geek squad selling over the internet.
I currently have insurance and just heard about this. I’m getting quotes from other insurance companies now. Probably will switch to Progressive. I’m paid with esurance through May 2012, but will be canceling as soon as I can get another policy elsewhere setup.
This is a crying shame. Esurance was the only insurance company that I ever felt as if I was actually a customer. I’ve had them for quite some time now and have had great experiences across the board. Allstate is a terrible insurance company and I never want to be one of their customers. They’re going to wreck esurance. I won’t be around for it! This is a shame because Esurance was such a great option for so many people.
I was hit by a driver carrying Allstate insurance 5 years ago. As the victim, I still to this day cannot believe how poorly Allstate treated me. Nothing but a nasty, huge, old-fashioned company. Too much business, not enough innovation. I’m upset, but I’m getting myself out of the situation. I suggest other esurance policyholders do the same. It’s not esurance anymore.