Allstate Kicks Off Rollout of Web Sales

NEW YORK (06/30/2000) - Allstate Insurance Co. will begin a massive restructuring next month, rolling out a national program to sell insurance directly to customers on the Web. In the process, it's eliminating all of its 6,000 employee agent positions and making them independent contractors.

Edward Liddy, Allstate's president and CEO, announced last week that the Northbrook, Illinois, company is expanding its Internet and call center service, which began with a "soft launch" in Oregon in May.

The company's agents, Liddy said, were given the option of joining Allstate's current force of 7,500 independent contractors by July 1. The contractors earn a higher commission than employees but are responsible for their own benefits, office expenses and staffs. About 15% of the former employees left the company, he said.

"This is a bold step," said Lee Spirer, head of the financial services practice at Cambridge, Massachusetts-based Mainspring Communications Inc., an Internet strategy consulting firm. "Clearly, there was thought that went into it, and the benefits of making the switch now outweighed the short-term costs."

Allstate's plan is unique in that the company doesn't plan to join forces with online aggregators.

"We have what all the aggregators want," Liddy said. "We have the brand." The addition of Internet and call center capabilities gives Allstate a "much more powerful way of selling" its insurance products than relying on aggregators would, he said.

Allstate isn't giving up much, according to Spirer.

"The aggregators have not proven to drive substantial business for any of the providers yet," he said.

So far, only automobile insurance is available through Allstate's Web site and call centers. That's a smart place to start, said Linda Alt, an analyst at Stamford, Connecticut-based Gartner Group Inc. "Auto insurance is the primary insurance that most people are shopping for online," she said.

Liddy said Allstate plans to add homeowners' insurance in September. "That's something that an Internet-only company wouldn't be able to do," he said. "You have to have a physical presence to be able to go out and inspect the homes."

It took several months for Allstate to develop its Internet strategy and ensure commitment from all levels of management, Liddy said.

"I suppose when I look back on what we're trying to get done, moving even faster would have been a smart thing to do," he said. "The price for inactivity can be very high."

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