The year of 2020 has not been a good one for business. Extended lockdowns had resulted in declining customers and decreased profits for most of the business. The insurance industry has not been anything different. In this scenario Allstate, one of the biggest insurance companies of the US, has laid off 8% of its total employees, which resulted in cutting down almost 3,800 employees in different departments, such as in support, claims and in sales. However, the question is, is the layoff of an impact of pandemic or has it been one of the strategic moves of the company. For finding out the proper answer to this question, we have developed this article by compiling all the necessary data and by analyzing those.
The reason behind Allstate layoff
The invasion of Covid-19 can seem to be the apparent reason of the Allstate layoff; however, the truth may not necessarily be the same. According to the big media hubs, the layoff is rather strategical planning, that has taken place to ensure better profitability of the company.
Allstate used to be a captive carrier and took a huge step towards changing its approach to be a direct-to-customer focused company. This has certainly caused a huge impact on the agents and employees of the company. It needs to be stated that captive agencies are mostly successful in the rural areas of the US and there are almost none of the Allstate franchise are listed for sale. Most of the Allstate listings are limited to urban areas like Florida and California. Hence, it is quite natural for the company to run lower on profit than its competitors. In this scenario it was important for the company to make a shift and to increase their chances of gaining more customers.
Allstate office
On another note, the captive agencies usually possess traditionally trained agents and most of the times they are not so accustomed to technology. In this 21st century knowing the bare minimum technical skills is a requirement for survival. Moreover, the new generation customers are more comfortable with using a technical interface to claim a file than dealing with an agent face to face. And the companies need to change their approach for the customers in order to gain their attention and preferences. Thus, Allstate had to take this bold step for ensuring a good spot in the insurance industry of the US and proceeded with the Allstate layoff.
During the layoff announcement the CEO of Allstate, Tom Wilson pointed out to the paid growth of GEICO and Progressive in the market of auto insurance and established that as one of the major reasons for this firm step.
The impact of the Allstate layoff on the agents
Even though Allstate has refused to give up the captive agency model, it has made the work even harder for the agents. The company has ensured all the way of gaining profits; however, the agents would have to compete with the company itself. It can be a very tough to find customers and to retain them as there are several added benefits provided in the direct-to-customer program. For the company, this move is very beneficial as they would be able to cut a good amount of additional expenses. Moreover, the customers can gain attractive discounts if they are opting for the direct-to-customer program, which makes the entire scenario even tougher for the agents.
Allstate is providing 7% discounts to the customers who join via the direct channel. It is certainly a tough task for the agents to sell the same insurance plan to the customers. Additionally, after the Allstate layoff the company has reduced the commission rate of the agents as well. They now provide 23% less on new commissions and 10% less on renewals. Additionally, the company’s recent activities regarding acquisitions and consolidations makes the fact that they prefer independent and direct channels much more than the traditional approaches. Thus, it can be considered as a clear indication that the layoff is not an impact of the unexpected circumstances rather it was a potential strategic movement.
The impact of Allstate layoff on the customers
As it has been stated before, with the direct-to-customer program the customers are more likely to be benefitted in the area of discounts and prices. As the company is more focused on building itself following the model of GEICO, it has gone for cheaper premiums and fast binding techniques, however, the process of claim is more likely to be difficult. It may appear to be easy while purchasing insurance. However, as with the Allstate layoff the company has cut down most of the employees in the service and support department the claiming process can turn out to be difficult beyond imagination.
Continue reading the article at ALInscribe’s article named Everything You Need To Know About ALLSTATE Layoff.
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