October 1 - 3, 2000, The Westin Providence, Providence, R.I.

How Allstate Became an E-Commerce Company Steven L. Groot, president, Allstate International

Building the I-Road Is a Tough Haul, Allstate Executive Says
By Barbara Bowers, senior associate editor, Best's Review: Barbara.Bowers@ambest.com

Allstate is moving forward as scheduled on its ambitious new technology plan, but it's still too early in the developmental stage to gauge its impact on the company's bottom line, said Steven L. Groot, president of Allstate International and the executive sponsor of Allstate's Internet and call-center initiatives.

Meanwhile, some plans for the full rollout have been delayed as the company completes the early stages of its state-by-state rollout.

"What we've accomplished in the last year is nothing short of amazing," Groot said of Allstate's efforts to implement its new business model, which is planned to take the nation's second-largest insurer from a mainframe environment to a Web-based personal-computer network. "But putting this on paper and putting it into practice are two different things," he said.

Groot spoke at "E-Fusion: Where Insurance and Technology Converge," a conference sponsored by A.M. Best Co. held Oct. 1-3 in Providence, R.I. Full coverage of the event is available online at http://www.ambest.com/e-fusion.html.

Groot told the audience of insurance executives and technology experts about the issues and ideas behind Allstate's Internet strategy---the biggest e-commerce rollout in insurance history.

Allstate made headlines in November 1999 when it announced plans to fundamentally change the way it markets and prices its products. Dubbed the "Good Hands Network"---a play on its slogan, "You're in good hands with Allstate"---the company's new model seeks to blend use of the Internet and toll-free-number service with Allstate's agent force.

This multiaccess approach is "the best way to win," Groot said. "The pure Internet approach won't have enough of a price advantage to make a compelling case to consumers," he said.

Originally, Allstate's plans called for introducing new, cutting-edge technology in 2001 to handle the large volume of consumer contacts expected at its call centers. "Those are not the plans now," Groot said in an interview following his presentation Monday, acknowledging that "it's not in the budget for 2001." He said it's still not known when Allstate will add this new technology.

Groot told conference attendees that for the rest of this year and through 2001, Allstate will concentrate on making its Good Hands Network widely available to consumers. The company wants its network to reach 40% of the U.S. population by year's end.

"Our goals are to focus on functionality and delivery of this system, not on the number of hits," he said.

Groot said that in its early stages, the company's Internet efforts have not produced many sales of policies. But he added that the Internet market for insurance is still very small. Allstate's Web site receives 700,000 to 800,000 hits a month, but only a small fraction of these visitors completes the quote process. "A lot drop out when they're asked information about a credit check," he said. "But some go on through the quote and buy."

"We just don't know yet" what the sales figures are from this effort, Groot said. Within five years, however, when all the elements of its plan fall into place, Allstate expects to see more than 20% of its premium coming from direct channels.

The company launched the network in Oregon in May. Its state-by-state rollout continued in Colorado and Louisiana in July, and Arizona, Illinois, Missouri and Ohio in September.

The call-center initiative also is still too new to evaluate its impact, Groot said. "We've just started more specific advertising for these," he said. "They haven't generated enough volume yet to talk about closing rates."

Four call centers are up and running. Through the end of August, the company had hired, trained and licensed 500 insurance professionals to help staff the centers. By the end of the year, that figure is expected to reach more than 800, Groot said.

The attrition rate of licensed call-center representatives is low, he noted. The company can't afford a large turnover here, he said, since it is investing in an intensive training and qualification program for each hire. "We're not looking for part-time people, we're looking for people who are looking for a career," he said.

Groot acknowledged that implementing this plan has been a mammoth effort.

"Five hundred employees are working full time to make this network succeed," Groot said. "We've interviewed more than 1,500 people for the call centers. We've spent 550,000 hours designing, testing and building the technology.

"We're running hard, but we're confident we can keep up the pace," he said.

Groot laid out several lessons learned in constructing Allstate's new system:

• Don't wait for the perfect solution;

• Think big, start small; and

• Trust people to succeed.

Groot predicted that, for the near future, the transition to online buying of insurance "will continue to move at glacial speed." But he sees the Internet as having a major impact on the claims side, providing insurers like Allstate with dramatic cost-saving opportunities.