Allstate was founded in 1930 as a subsidiary of Sears. As the giant retailer embarked on its great expansion, Allstate sold auto insurance through all of the new stores. Following World War II, the popularity of the automobile in the United States sparked continued growth for Allstate. In the late 1950s, Allstate added life insurance and continued to grow for the next several decades.

In the 1980s, Sears became interested in expanding its financial services operations. The retailer sought to become a diversified financial services company, launching the Discover Card through Allstate’s Greenwood Trust Company. Hard times followed for the retailer, however, especially on the traditional retail side of the business. Sears changed course and began to divest its financial holdings. Sears sold 20% of Allstate in 1993 and the remainder in 1995.

In 2000, Allstate added online and telephone distributions and acquired Provident National Assurance Company. To reduce distribution expenses, Allstate eliminated 4,000 jobs that year;

turned its agent-employees into independent contractors; and launched an integrated distribution system that allows customers to transact business via the Internet, telephone, or traditional agent.

Allstate entered the car repair business in 2001 with its purchase of Sterling Collision Centers. An intense effort aimed at adding new Sterling outlets throughout the United States followed although some critics have suggested that an auto insurer owning a body shop constitutes a conflict of interest.

Natural disasters have had a major impact on profit and loss in insurance companies like Allstate over the years. For example, the 2005 hurricane season resulted in substantial catastrophic losses in the insurance industry, including $5.67 billion for Allstate.

Today, Allstate is the second-largest personal lines insurer in the United States behind State Farm. Although the firm maintains a global presence, Allstate has divested most of its unrelated holdings, particularly those outside of North America; its current focus is on the United States and Canada. Allstate’s subsidiaries include Allstate Life and Allstate Protection. Allstate Financial provides life insurance and investment products aimed at affluent and middle-income consumers.

Case Challenges

1. Allstate has chosen to concentrate its efforts on the United States and Canada. Is this a good strategic move? What opportunities and threats are associated with expansion into other parts of the world?

2. Evaluate Allstate’s competitive position vis-à-vis rival State Farm, the industry leader. What can Allstate do to compete more effectively with State Farm?

3. How has the Internet—including instant access to insurance quotes and customer satisfaction data at sites such as esurance.com—affected traditional insurance companies like Allstate?