Allstate Agents Provides Protection

1. A Brief Guide on Allstate Layoff What does this mean for Allstate agents?

2. Allstate giving up their captive model? • To begin with, Allstate is not giving up their captive model • Allstate is looking to shape itself on the GEICO model, one of the cheapest auto insurance alternatives • It is only trying to cut down on its operational costs. • However, making it very difficult for their captive agents to grow any further

3. How does this impact the newcomers? • For people who are just starting out, it is going to be extremely difficult to find and retain customers • Furthermore, because Allstate is trying to cut down on costs, it will be quite tricky for the starters • The recent acquisition of National General, makes it crystal clear that they favor independent and direct channels over their traditional captive approach

4. Difficulties for agencies competing directly with the parent company • Direct selling allows insurer to provide packages and several discounts that might not be available through their captive agents • Direct channels are offering 7% discounts on policies bought through the channel, making it extremely difficult for agents to sell the same products to their customers • This very reason makes the option of direct selling much more viable to its customer presenting great difficulties for its agents

5. Post layoff • Allstate reduced its commission rate for Allstate agents by –23% on new commissions • Furthermore, also reduced its commission rate for Allstate agents by –10% on renewals

6. Why did it happen? • Whether or not the pandemic happened, Allstate would have still laid-off employees • The Allstate franchise, like any corporation, is profit-minded • Moving directly from a captive carrier to a direct-to-customer focused one • Allstate’s CEO specifically cited GEICO’s progressive rapid growth as a major reason for this shift.