Allstate plans to phase out its struggling Esurance brand as part of a broader overhaul in how the company does business, the Illinois-based insurer disclosed on Dec. 19.
Executives are framing the changes as something that will boost customer access, lower costs and enhance overall offerings. What’s more, they say that retiring the money-losing Esurance brand it snatched up in 2011 will free up substantial money for marketing and compensation for agents.
“Allstate has thrived for 88 years through innovation such as the use of local branded agencies, telematics pricing for auto insurance and settling auto insurance claims with digital photos,” Tom Wilson, Allstate’s chairman, president and CEO, said in prepared remarks. “This plan builds on a history of creating change and will improve our competitive position and accelerate growth. Customers will benefit from additional service options, greater connectivity and higher-value products, but the plan requires us to embrace change.”
Wilson added that the changes help reaffirm Allstate’s commitment to its agents by giving them “increased advertising, enhanced new business opportunities and higher new business compensation.”
Allstate groups all of the planned changes under something it calls a “Transformative Growth Plan.”
As far as Esurance goes, plans call for phasing out the brand in 2020. Traditionally, customers could buy Allstate-branded property liability products through Allstate agencies, call centers and online, but internal business rules limited the choice. Esurance, a seller of auto, home, motorcycle and renters insurance was an online direct sales alternative. Its demise won’t eliminate the direct sales option for Allstate proper, however, with expanded access to Allstate products in 2020 that let consumers choose their way to buy insurance without restrictions.
Allstate bought Esurance in 2011 for about $1 billion in a deal that also included associated site Answer Financial, an online auto and home insurance agency.
Esurance has often been a money loser, though margins improved in recent years. The brand reported a combined ratio of 101.1 in the 2019 third quarter and 100.4 for the first nine months of the year. In the 2018 third quarter, Esurance booked a 102.1 combined ratio, and 101.2 for the first nine months of that year.
Allstate said it will combine Allstate, Esurance, Encompass and Answer Financial groups into a single business. Allstate is pitching this is something that will help lower costs and support more competitive prices without reducing margins.
Encompass, a personal lines insurance business purchased from CNA in 1999, booked a 105.8 combined ratio in the 2019 third quarter, 10.1 points higher than the same period a year ago – a spike driven by higher catastrophe losses.
Allstate said it will redesign its property liability products “to provide simple quality, rewarding engagement and community affiliation.” Pricing will be based on factors including “sophisticated rating algorithms,” such as telematics, reflecting the service model a customer chooses, Allstate said.
Other planned changes:
- Customers will be provided with a “circle of protection” leveraging a wide range of products, including home, renters, personal liability and life insurance, product protection plans and identity protection.
- Allstate will boost centralized customer service capabilities to improve consistency, reduce costs and enable Allstate agents to focus on growth and relationships.
- The company will invest “significantly” more in growth and technology in terms of marketing the Allstate brand by reallocating Esurance spending and reducing operating expenses.
- Allstate said it is building “new technology ecosystems” to support increased connectivity, new products, operational adaptability and lower expenses.