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Is Allstate Making an Innovation Play by Buying Esurance?

Aite Group's Stephen Applebaum suggests that by buying Esurance, Allstate could jumpstart its innovation culture, better positioning it for the future.

I reached Aite Group's senior analyst for P&C, Stephen Applebaum, shortly after the news broke that Allstate had acquired Esurance and Answer Financial for about $1 billion. Calling it a "smart move" for Allstate, Applebaum pointed out that it allows the giant to make a meaningful move into both independent quoting (through Answer) and direct sales (through Esurance).

"It's time for them to start moving," Applebaum said. "They haven't been doing a great deal online, and they haven't been making many inroads with the younger demographic."

By purchasing existing businesses in these areas — even if they don't add too much market share relative to Allstate's existing size — Applebaum explained that Allstate is able to cut its time to market with those crucial offerings.

But perhaps an overlooked capability that Esurance brings to Allstate is its corporate culture. Esurance has an innovative reputation, Applebaum says — and if Allstate can find a way to incorporate that innovative culture into its other lines, it will be well-positioned to reach the next generation of insurance customers.

"I wouldn't be surprised if [Allstate CEO] Tom Wilson is thinking about the innovation culture at Esurance," Applebaum says. "There was a time when Allstate was highly innovative, and they might have lost a bit of this over the last decade. If they can leverage that technology and innovation in their life and property business, it could help there as well."

In a related note, I&T editorial director Kathy Burger wrote about the importance of business/IT alignment in supporting an innovative culture for our last issue, which was all about innovation in insurance. In a crowded P&C market, finding ways to differentiate — whether through technology, product design, or customer experience, or whatever else — will be increasingly important. Innovative companies are surely at an advantage.

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

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