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Market Analysis of Allstate Insurance Company

Introduction

Allstate Insurance Company began its operations in 1931 as an Illinois Corporation which is currently licensed in over forty states to write property and casualty business. It became a public company in the year 1993 after enlisting in the New York Stock Exchange. It is the largest publicly held company for personal lines insurance in the nation. It currently ranks as the 17th largest company offering life insurance and insures more than 14 million households with over 10,000 agents and 39,000 non-agent employees.

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Allstate Corporation, also known as ALCORP, is the owner of all the outstanding shares of the common stock of Allstate Insurance Company. At Allstate, the mission of the council of corporate diversity is the identification, recommendation and championing of the implementation of initiatives and strategies for effectively driving high standards of performance for all. The company uses a diversity of management strategies. This helps them have an advantage over their competitors and be able to solve disputes that arise in the business environment.

This paper is an in-depth analysis of the marketing strategies employed by Allstate Insurance Company identifying critical issues in the organization that need to be addressed from the SWOT analysis, market segmentation and marketing mix of the company. It will finally provide recommendations on how to tackle the critical issues that arise to improve their marketing strategies.

SWOT Analysis

Examining the micro-and macro-environmental factors of Allstate leads to some of the following conclusions. As for the strengths, Allstate Insurance is currently the largest publicly held personal lines casualty in the nation with revenue of $40 billion. It also has a very strong reputation for embracing diversity and inspiring excellence with a commitment to high ethical standards and strong principles. They also have a good work/life balance especially since they have a youthful workforce, mentoring programs, exam support and above all a competitive pay and benefits package. The company is involved in communities through programs like the Helping Hands Committee, Allstate Foundation and Allstate Giving Campaign.

Allstate Insurance provides the best-in-class training program for an actuarial training program that is available to full-time employees and interns. They provide just-in-time training for developing actuarial skills which refer to the fact that learning can best take place when a trainee first obtains training in concepts and then has the opportunity of applying them in the real world situation. The result was an entry-level employee with a performance level that previously took them almost three years to obtain after just 6 to 9 months of training.

At Allstate Insurance, opportunities are constantly ever-expanding thereby creating new career opportunities. With the very effective training unit, they have the infrastructure for hiring entry-level employees and grooming them to desired standards.

The threat faced by Allstate is that since it is a market leader in the industry, many of its competitors tend to replicate the work they initiate and implement in the market. This is so because Allstate shares a prominent place at the table with legislators, regulators and industrial organizations therefore their work is more scrutinized. This requires their actuaries to have new concepts and ideas that can translate into maintaining and expanding their leadership role in the market.

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Market Segmentation

Allstate insurance undertook the diverse marketing strategy a long time ago with focus on sophisticated and many different segments of the market. For example they began reaching out to single moms and women conducting businesses, African Americans, Asians and the Latino communities in 1990’s. From there they have been developing diversity programs with the ultimate goal of increasing their market share through market development. They first focused on the Hispanic market after realizing the potential and they began offering life, property and casualty policies and later offering financial planning. Korzenny (2005) shows some of the cultural archetypes and dimensions that affect insurance message communication to Hispanics. They launched the Hispanic Business Team in 1995 and in four years had grown from $1 billion to $1.6 billion.

Allstate Insurance Company merged its advertising with a network of Spanish agencies with their agents and Spanish language marketing material so as to tap into their market. The company experienced some cultural setbacks and to overcome them they translated their advertising brochures so as to meet the demands of Latin American culture which were unique. They later formed two other teams to begin expansion of its market to Asian-American and African-American communities with similar efforts.

Marketing Mix

Allstate insurance Company has authorization to write life insurance, annuities, accident as well as health insurance as is defined in the New York Insurance Law. It is licensed to conduct its operations in over ten states including Delaware, Illinois, New York, New Jersey among others.

The policies it currently offers are on a non-participating basis however not exclusively. There is a small block of participating policies that had been issued before Allstate acquired PM Life. As for the product portfolio, the company provides insurance products which include auto insurance, life insurance, home insurance and investment products to the more than 14 million households. This can be broken down further to include whole life, term life, universal life, group annuities, individual annuities as well as accident and health insurance.

The core marketing channel is agents through which they offer their products. However they also use financial service firms and marketing through direct response (Mark, 2001). The agency operations are conducted in a single branch office located in New York City.

Issues Arising

The first issue that arises from analysis of the company is the excessive profits and rates charged by Allstate. This is in contrast to the low level of claim pay out by Allstate. In the late 80s and early 90s, Allstate had insurance products that were of greater value to consumers than those of its competitors. Between the year 1987 and 1996, property-casualty insurers paid out 70% of premiums as benefits. However, from 1997 to 2008, the payout dropped by 7.1% in value to consumers for the typical insurance product as it stood at 65%. Allstate paid out 73% of premium in benefits between 1987 and 1996 but hit a low of 59% from 1997 to 2008 which is a decline of 19.2% in value to consumers.

Another issue is questionable settlement of claims which results in low claims payment. Allstate adopted a claims payment technique that was designed to reduce payments to policyholders without first determining whether each individual claim was valid and genuine. They incorporated an automated payment system that they called Colossus which benefited the shareholders financially at the expense of policyholders. There is evidence of a pattern of underpayment. Allstate reduced its claim payout almost by 20% relative to industry results.

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The third issue is mistreatment of consumers throughout the country after hurricane Katrina. Allstate dropped its cover for hundreds living in coastal areas in the country for example it dropped thousands of people living in Florida that it had insured. They however increased auto insurance in Florida.

This is followed by the issue on high consumer complaints. Allstate received more complaints than all of its major competitors most of which were related to their practices of claim settlement which consumers view as unfair.

Allstate has been noted as using unlicensed telemarketers as agents. They use representatives of the telemarketing service and solicit business through the phone that are unfortunately not properly licensed and appointed although the use of telemarketing is permitted.

Moreover, there is the issue on rating and underwriting practices that are unfair. Allstate develop difficult to understand and complex pricing systems that are not related to the customer risk which seem to make comparison of products difficult for consumers and leads to higher rates for the poorer and minority consumers. This practice is therefore oppressive to a particular group of consumers.

Allstate also requires that potential customers are required to disclose information regarding past testing for illnesses related to HIV and AIDS which is unlawful. They undertake this line of questioning especially for those seeking products in their life insurance.

Allstate believed that sharing information on its procedures and strategies would give their competitors unfair advantage over them. They believed that the competitors would evaluate the information and learn their business techniques and programs which they developed as a result of time investment, financial resources and manpower thereby diluting effectiveness of their investment and competitiveness.

Finally, it emerges that there is an issue of shifting costs to taxpayers. Allstate seeks taxpayer subsidies for risky insurance cover particularly from Congress but has been criticized highly by policyholders and state officials for underpaying claims especially after the hurricane Katrina.

Recommendations

One of the recommendations is that the company should establish suitability procedures and guidelines for financial service firms and other agents like the telemarketers contracted (Richard, 2002). This also goes in hand with the establishment of a system of monitoring the appointed producers to ensure they all follow guidelines. They should also discontinue the use of unlicensed telemarketers.

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Another recommendation is that the Company should discontinue the practice of asking potential customers questions requiring them to disclose whether they have been tested for HIV and AIDS related illnesses.

They should also revise their practices so as they apply the statutory laid out rate to prevent unfair underwriting and rating of customers and also in cases of delaying claim payments. The procedures for their marketing direct response should be amended to comply with the required regulations. This is in regard to the use of agents to market their products.

They should also examine their automated system for claim payment determination and make sure they review the claims made by the customers since they started to use the system. Those that are entitled to claims should be paid with interest for the amount that was due to them.

Finally, they should cease the practice of passing on costs to the taxpayers as it earns them negative publicity due to the criticism they receive from policyholders and state officials which could hurt their business. They should revise their procedures to reduce the actual net costs of the policy loans.

References

Richard A. Spong. (2002). Report of Examination of the Market Conduct affairs of Allstate Insurance Company. Web.

Allstate Insurance Group. (2002). Web.

Mark, H. (2001). Insurers target their marketing. Insurance Times, Vol. XX No.15. Web.

Korzenny, F.,& Korzenny, B. (2005). Hispanic Marketing: A Cultural Perspective. Miami: El Sevier Butterworth Heinemann.

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StudyCorgi. (2021, November 10). Market Analysis of Allstate Insurance Company. Retrieved from https://studycorgi.com/market-analysis-of-allstate-insurance-company/

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