Entering and Exiting Digital: What’s Up with Multi-Brand Strategies of P/C Insurers?

By | January 24, 2020

Two of the largest property/casualty insurers in the U.S., Allstate and Nationwide, made headlines recently when they announced shifts in their respective multi-brand portfolios. Faced with the prospect of staying relevant in an environment that has seen minimal organic growth and a steady stream of digital newcomers entering the market, these types of rapid brand strategy changes are becoming downright commonplace.

First, Nationwide announced a new digital offering called Spire, an auto insurance digital platform geared toward Millennial customers. In doing so, it joined the new wave of casualty insurers launching digital brands that announced their own similar spin-offs, like State Farm with HiRoad, which is essentially auto insurance via an app, or Toggle from Farmers, a fully digital brand for rental insurance. On the other hand, in December, Allstate announced that it is phasing out the Esurance brand as part of what it’s calling a “transformative growth plan.” This move come after Liberty Mutual retired its Lulo brand for rental insurance.

What is causing these shifts? Why are some carriers entering with new digital-first brands while others are retiring theirs? In a word: disruption.

According to a recent J.D. Power analysis, the number of “at-risk” consumers – those consumers that are open to switching insurance carriers – has reached its highest level in decades. The core driver of this increased attrition risk is higher consumer expectations for insurance carriers, which many are failing to meet.

Multi-brand strategies have long been a part of the insurance industry’s playbook for addressing that problem. The approach has enabled carriers to target multiple customer segments – many of which have varying insurance needs and expectations – with a more customized experience. Perhaps the most visible examples of the practice have been among exclusive agent carriers, such as Liberty Mutual with Safeco, which offers an alternative for independent agents, while reserving the flagship brand for tied agents.

On the surface, the idea of launching a new brand to compete with insurtechs and other disrupters may sound like a logical step in this environment, but successfully executing a multi-brand portfolio presents its own set of challenges.

Spin-Off Success Factors

J.D. Power has been monitoring brand performance across the industry for decades – evaluating how customers respond to brands and what it takes to develop a brand that truly connects with consumers. Based on that research, we’ve found that the key factors that determine the success or failure of a spin-off are:

  1. creating a compelling brand narrative that addresses the needs of underserved segment of the market;
  2. maintaining the agility to deliver on a brand promise while managing profitability; and
  3. execution that distinguishes a brand from its competition, while avoiding cannibalization within its own portfolio.

Two of the greatest challenges to managing a successful multi-brand portfolio are the risks of cannibalizing consumers and competing over finite resources. For example, every marketing dollar that is poured into a start-up sub-brand is coming at the expense of the legacy brand. Given the advertising arms race underway, which has now surpassed $7 billion annually, the investment required to stand up a new brand is a risky proposition for carriers already struggling for share of voice.

The upsides of a multi-brand strategy are also clear. New start-ups can benefit from the depth and breadth of resources shared with their legacy parent brand without adopting the baggage. The premise is that while technically serving as a direct competitor, these spin-off companies can ideally target different customer segments than previously reachable by the primary brand. They aim is to deliver an entirely new experience and focus on digital engagement and app-based channels for sales and customer service.

For example, the strategy being deployed by Spire, Toggle and HiRoad is to attract younger consumers who find traditional carriers too expensive and move them through corresponding brands throughout their lifetime based on their evolving insurance needs. The end goal is to keep these consumers within their family of brands through multiple life-stages in response to heavy-pressure to produce growth within an increasingly fragmented consumer marketplace.

Will the approach work?

While a digital-first approach to customer engagement opens new doors and helps traditional brands compete in new ways, it cannot come at the expense of legacy brands. Industry leaders generally have two options for achieving their portfolio goals: They can restructure their existing established brands by repositioning those that have lost relevance or expand into a multi-brand portfolio strategy offering tailored experiences. With several carriers pursuing the latter approach, only time will tell if their efforts will be rewarded by the market.

One thing is for certain – the proliferation of a multi-brand strategy is yet another complicating factor in in the highly-complex property/casualty insurance marketplace. Do not expect things to get any simpler any time soon.


About Tom Super

Thomas Super (thomas.super@jdpa.com) is Vice President of P&C Insurance with J.D. Power. More from Tom Super

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