Why Allstate Almost Has It Right

Since 1982, technology—data processing, increased dependence on electronic systems and greater use of analytics—has become the gorilla in the room. That gorilla goes anywhere it wants to, and that's the problem our industry faces today. Leaders around the world have been trying to push the gorilla in a direction they want it to go, but the technology gorilla has a mind of its own. Chasing the advances while trying to predict the future has proven difficult at best, impossible for some, and all are paying the price for misjudgments. About the time they think they have a good plan, something totally unforeseen pops up.

Look what happened with Facebook, LinkedIn and Twitter. No one in the industry foresaw the impact social media would have, from being a simple sharing platform for students and friends to a platform that has facilitated the collapse of countries and their leaders. Facebook now has 500 million members; within a few years it will be 1 billion.  That is one-sixth the world's population.

What does this have to do with Allstate's decision to purchase Esurance?  It suggests several things:

1. Allstate believes past decisions like the use of Encompass did not work.
2. Allstate's current delivery system is inadequate and poorly managed.
3. Technology-based data relationship analytics does not produce the results that were promised by professional consultants.
4. Allstate has too much “academic” leadership.
5. A high percentage of agents have become caretakers of a price-based system.
6. Allstate leadership and agents exerted too much influence on corporate policy for rate wars when the delivery system was underperforming even with great rates.

Someone in the Allstate organization realizes most of this, so that brings about the decision to add another “touch point” for customers their current system does not seem to reach.

So why is the Allstate/Esurance deal “almost” right?

Allstate has made a big step in the right direction, but I believe it might under perform just like Encompass unless more is done. 

To really succeed, our industry should study the GM model, also known as the “Sloan strategy.” Alfred Sloan was the long-time CEO and president of GM who is credited with developing the “planned obsolescence” and “follow the person buying” strategies.

Years ago, GM leadership had an epiphany that led to GM becoming the largest corporation in the world (their later failure happened for other reasons). This marketing and production epiphany was soon copied by Ford and other companies.  Quite simply, GM realized that as young auto buyers age, they still want to feel like they did when they were 24 and bought their first Impala 409, Camaro or GTO. This led to demographic-based design progressions, in which the Impala 409 became an Impala family car, then an Impala station wagon.  Customers identified with the car name, so the car changed and aged with the customer. The Pontiac GTO owner became a loyal Pontiac owner, so Pontiac offered the loyal customer “that Pontiac feeling” as they aged.  GM did not have to resell the customer on Pontiac; they just had to offer the customer the right car at the right age and still have the name associated with it.  This was called “a car for every purse or stage of a driver's journey.”

This program was called “staging.” 

• Stage I buyers were single and wanted performance and looks.
• Stage II buyers were young marrieds who wanted sporty sedans or coupes.
• Stage III buyers were families that wanted larger four-door sedans, station wagons or minivans.
• Stage IV buyers, older with some money, wanted luxury upgrades.
• Stage V, midlife buyers, wanted cars with sporty performance.
• Stage VI buyers, on a retirement budget, wanted something sensible and smaller.

That is what Allstate needs to do with its delivery system. Esurance is perfect for the 24-year-old who has no great need for an agent, but that young buyer will soon be older, and his or her insurance needs will change.  These buyers will always be able to use technology, but that alone will not suffice forever.  There is and always will be a place for agents, but agents need to step up,work the system better, be the leaders of their agencies not absentee owners.     

In a recent article from ThinkAnalytics, the author made this statement: “CRM (customer relationship analytics) is an enterprise business strategy encompassing a broad range of processes and functions…sales force automation, e-commerce, etc.”

The gist of the article was that companies are “missing the value generated by analyzing new and existing customer information,” as if simply having the information is going to cause underperformers to suddenly produce greater results.  Giving a person a dictionary does not make them a great speaker, but the big money consultants selling “data analytics” are doing exactly that.   

If agents don't want to be “sales force automized,” they need to make significant changes to their business models.

Senior leadership has become overly dependent on data controlling their decisions; people still lead people, but expect automaton results.

With its purchase of Esurance, I believe Allstate has made a huge step in satisfying the GM model. Now it is up to the company and agents to produce the quality product the customer will want to keep as they age.