Faced with attrition in its captive agencies, and declining number of policies-in-force, Allstate Corp. is turning to a surprising distribution source to drive its brand: independent agents.
The Northbrook, Ill.-based carrier is circulating promotional material directed at independent agents, telling them there are 10 reasons to “seriously consider Allstate” as a company they should represent. The letter notes Allstate’s stability, rating strength, longevity, customer and claims service ability, and brand recognition.
The promotional letter says the company gives agents opportunities to build insurance packages with the insurer’s 13 lines of available insurance.
Allstate circulated the promotional material—which includes brochures on Allstate Auto and Homeowners coverage—during the recent meeting of the Independent Insurance Agents & Brokers of America in Washington D.C. When asked about the material at the meeting, an Allstate executive indicated the company would be announcing an initiative sometime in June.
“Allstate has worked with independent agents since 1974,” says Allstate spokeswoman April Eaton in an email sent to PC360. “Allstate continually evaluates market opportunities to ensure that customers are able to do business with us how, when and where they want to, including through a local Allstate [independent agents].”
Eaton says Allstate has 1,700 independent agency-owners located in rural markets. She says Allstate "will consider appointing independent agency owners only in rural markets where we do not deploy exclusive agents. We want our current independent agenices to grow with us."
The company also has its Encompass brand that sells personal lines and small-business insurance exclusively through independent agents. However, Jim Fish, executive director of the National Association of Professional Allstate Agents, says the distributed material does appear to be a new recruiting effort by Allstate to sell a brand of products that had been the domain of captive agents in urban areas.
Fish says Allstate has seen its number of captive agents decline and may be attempting to shore up its market by seeking growth through independent agents, and their established book of business. He says the Allstate brand has watched the number of policies in force (PIF) decline and has not had much luck growing its book of business.
According to filings with the U.S. Securities and Exchange Commission, Allstate said its policies-in-force for Standard Auto dropped from 17.5 million in 2010 to 16.9 million in 2012, and fell another 79,000 by the end of the 2013 first quarter.
Non-Standard Auto policies fell from 640,000 in 2010 to 508,000 in 2012. In Homeowners, the number has dropped from 6.7 million PIF in 2010 to 5.97 million in 2012.
On the other hand, Allstate’s independent agent brand has grown, as has its online auto brand—Esurance—over the same period. In Standard Auto, for instance, Encompass went from 689,000 PIF in 2010 to 708,000. Esurance, a direct-to-consumer insurer, grew from 786,000 to 1.03 million during that same period.
Allstate attributes its PIF declines in Allstate Standard Auto to “fewer policies available” on the auto side and, in part, the cessation of writing Homeowners in coastal areas in certain states.
Fish argues that Allstate’s main problem is the company’s compensation structure. Allstate has cut its commissions to its captive agents to 9 percent, but increased incentive payments. Meanwhile, Allstate raised independent-agent commissions to 15 percent, Fish says. Another advantage for Allstate’s turn to independent agents, Fish adds, is the insurer can connect with a mature book of business instead of investing in the development of new agents.
Eaton says the commissions for independent agents have been the same since 2005.
Last year, in the company’s annual report, Allstate said the number of its exclusive agents fell from 11,500 in 2010 to 10,000 in 2011. In the company’s most recent 10-K filing, Allstate says it has approximately 9,300 exclusive agencies in approximately 9,000 locations. Eaton adds, "Exclusive-agency retention is at the highest level we've experienced in recent history."
During a recent call with financial analysts discussing the company’s Q1 results, CEO Thomas J. Wilson dismissed any speculation that the company’s decline in the number of captive agents has anything to do with its new compensation structure. Matthew Winter, president of Allstate Auto, Home and Agencies added that the reduction in agents was not necessarily unintended in some cases.
In a transcript of the Q1 call, Winter says the company is “seeing a stabilization of agency numbers” and adds “we have a large initiative underway to not only grow the number of agencies, but to grow the number of licensed sales professionals, which is working quite well right now.”
Fish says Allstate needs to explain its plans to its captive members and he intends to bring up the issue at the company’s stockholders meeting.
“I’ll be asking them some questions,” he says.