I've been covering e-commerce for a while, and whenever a traditionally bricks-and-mortar company makes inroads into direct online sales, there's always some segment of the old guard that feels threatened, betrayed or both. Sure enough, while I live-tweeted the Allstate/Esurance conference call yesterday morning, I received a tweet that said, in part, "Wonder how all the Allstate Agents feel."
Well, I don't know how they feel, but I hope they're not too worried. In fact, they should be glad that their company made a savvy buy that will help position it — and them — for consumers of the future.
Some perspective: Allstate reported slightly less than $6 billion in premiums earned in the first quarter of the year. Esurance recorded about $200 million.
"A billion dollars for Allstate's not a huge number," says Cliff Gallant, CFA, a P&C industry analyst at Keefe, Bruyette, and Woods. "It's more important strategically. They have an old school distribution model, but they've never developed an online presence."
Still, Gallant says, "Allstate doesn't want to blow up that agency relationship, but they recognize that this is something they need to do. I think it's at this point the agents recognize it too. They would be naive to think Allstate can make it the way they did in the past."
I agree. It would be folly for Allstate to cut out its gigantic profit center that is based on agent distribution in favor of the direct channel. Rather, the move allows the company to "jump start [its] direct online distribution presence," Gallant wrote shortly before our phone conversation. As others have noted (most notably Steven Applebaum of Aite Group yesterday), simply bringing in those capabilities allows the company to explore ways to keep all of its business segments relevant in the digital sales age.
"They could use this to help their agents," Gallant says. "It could be a lead generator: They bring the customer in with the auto product, but get their information into agents hands and leverage that initial tie for other products."
There's also no rule that says that agents can't develop their own direct sales websites and sell insurance online through their agencies. Plymouth Rock Assurance released an application earlier this year that helps its agents do just that.
"Agents also see the trend of continuing increase in internet shopping and social in particular," Plymouth Rock CMO Keith Jensen told me at the time the application, called the Online Policy Purchase Tool, was launched. "They know they should be playing in that arena, but don't know how to begin.
"We think there's a space to play for consumers who want to work online but also work with an agent," Jensen added.
And Allstate, which made great pains yesterday to talk about how it believes customers fall on a continuum between "personal-touch" and "self-directed," seems to get that as well. Just look at what the company highlighted when it brought in Suren Gupta as EVP of technology and operations earlier this year (emphasis mine):
Under his leadership, Wells Fargo re-engineered its real estate lending with new delivery capabilities that enabled the field sales force to serve customers more effectively with just-in-time information.
"Enabl[ing] the field sales force"... that's the kind of guy you want in a top tech post when your company makes a huge tech buy.
Nathan Golia is senior editor of Insurance & Technology. He joined the publication in 2010 as associate editor and covers all aspects of the nexus between insurance and information technology, including mobility, distribution, core systems, customer interaction, and risk ... View Full Bio