When Allstate made its bold move to direct sales, the Northbrook, Ill.-based carrier handed responsibility for the endeavor to one of its most-experienced executives. Steven Groot, an actuary and a lawyer, has been rising through the ranks of Allstate for more than three decades.
Groot has been sporting his most recent title, president for direct distribution and e-commerce, for several months. His mission is to lead the nation's largest publicly held personal lines carrier as it extends its foray into direct sales-selling and servicing policies on the Internet and through call centers.
He and his team appear to be making headway. As of late January, consumers in 15 states, representing about 40% of the population in the United States, could purchase or make claims on their Allstate policies over the Internet. About 900 employees were manning the company's four call centers. By the end of this year, the carrier's products should be available online in about 30 states, reaching 90% of the U.S. population.
Still, significant challenges lie ahead. One challenge involves how to compensate the company's agents in this new online world, some of whom contend that the commission structure for direct sales currently proposed by Allstate isn't fair to them (see article on page 8).
There are the technical challenges inherent in moving an offline firm online and into call centers. Allstate has 35 million existing policy records that need to be available to consumers using the Web and to representatives in the call centers, as well as on computers in agents' offices. "It's a huge job," Groot says, in a bit of an understatement.
Still, Groot believes that the variety of positions he's held within Allstate have helped prepare him for these challenges. Among the titles that have appeared on Groot's business cards: actuary, controller for the Denver, Colo. office; regional vice president of the Rochester, N.Y. office; vice president of pricing for auto insurance; and president of Allstate Insurance Company of Canada.
The benefit of such a peripatetic career? "I have an understanding of both the customer and the agency side of the business," Groot says. "In coming into new ways of distributing and servicing products for our customers, having a broad understanding of our operations and the customer side all are helpful."
As Allstate has launched its online services in different states, it has run television and radio spots in those regions. Those are followed by direct-marketing campaigns.
This year, the company is going to be more aggressive in its direct marketing efforts, Groot says. The firm will mail out about 40 million direct-mail pieces-10 times the 4 million pieces sent last year.
Marketing concerns aren't the only issues that Groot has to tangle with. Allstate has 14 million policyholders and 35 million policies. Each year, Allstate policyholders file about 7 million claims. Making such a massive volume of data available online, in call centers, and through agents, isn't easy.
One challenge is to make sure that data is readily available, accurate and up-to-the-minute in all channels. If a policyholder submits a claim-no matter what the channel-he or she will expect to see it online soon after its submitted.
"It has to be real-time, but most legacy systems are batch," says Kimberly Harris, senior analyst with GartnerGroup in Durham, N.C. "They have to make sure all channels are managed and working together."
To accomplish that, Allstate has taken a "layered" approach to improving technology, says Groot. The company has left its legacy systems intact, which are responsible for such tasks as mailing bills and policies, and feeding information on claims and policies to the firm's accounting system.
On top of its legacy systems, Allstate has developed a "presentation" layer; this is what online visitors, call center employees and agents see. This layer presents relevant information from the firm's massive databases.
Connecting the firm's legacy systems and its presentation layer is "a heck of a lot of middleware," says Groot.
The layered approach helped Allstate get online quickly. "This way, we did not have both market and technical risks," says Groot. When it announced its direct strategy in November 1999, Allstate committed $1 billion to the project. Approximately $300 million was to be spent on capital expenditures, and $700 million on systems development, implementation and rollout, and advertising.
As of October, says Groot, more than 500,000 hours had been devoted to the project by both Allstate employees and its vendors.
Once the Web site is fully launched, will it generate cost savings for the company and consumers? Most analysts say that while the Web is unlikely to materially cut costs in selling policies, it will help on the back end.
"The critical issue is that the Internet will make insurance companies more efficient with claims and applications processing," says Nick D. Fisken, vice president of Stephens Inc. an investment bank in Little Rock, Ark. "That's where the lion's share of expense savings are."
Using the Internet to streamline claims processing should scrape between 7% and 10% from insurers' expense budgets, says Fisken. That's enough to move insurers from a negative to positive operating income line. They would be able to either charge potential customers less, or keep the savings for themselves.
Having that choice will be important in the current economic climate, which is shaping up to be a tough one for insurers. "Prices are coming under pressure, and claims costs are going up," says Todd Eyler, senior analyst with Forrester Research Inc., Cambridge, Mass.
"The company has shown in the last year that they're very innovative. They've hired some wonderful thinkers at the development and implementation levels," says Gartner Group's Harris. "Now, the challenge is to put that into action."
Groot appears ready to take on that challenge. "I like being busy, and doing new things. What I'm doing now fits that."
Karen Kroll is a Minnetonka, Minn.-based business writer. This article was adapted from an article that originally ran in Financial Service Online, a Thomson Financial publication.
Steven L. Groot
Bachelor's degree, Michigan
Technological University; J.D. degree, LaSalle Extension University, Chicago.
October 2000 to present
Senior vice president, Allstate Insurance Co., Northbrook, Ill.
1998 to 2000
President, Allstate International.
1994 to 1998
President of Allstate Indemnity, which writes non-standard auto insurance.
1970 to 1994
Various positions within Allstate, including
regional vice president of the Rochester, N.Y. region; president of
Allstate Insurance Co. of Canada; and vice president, personal lines auto.
Member, California State Bar Association, American Academy of Actuaries. Member, board of trustees, Lawrence Hall Youth
Services in Chicago. Member, the National Advisory Board, the School of Business and Economics of Michigan Technological University. Fellow, Casualty Actuarial Society.
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