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Leaving
school
Scottsdale,
Ariz.
(Photo)
Persistent work by agent Chris King and more flexible
SRM auto policy pricing won back working mother
of two Audrey Contreras from a competitor. Contreras
has auto, renters and life policies with Allstate. |
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Focusing on customers first
is the surest way to build our business. But as
we expand, we must keep a close eye on our bottom
line and our capital as well.
It all starts with our Strategic
Risk Management (SRM) tool that integrates underwriting,
pricing and marketing to help attract and retain
the right customers with the right products at
the right price. In particular, SRM helps us attract
and keep high-lifetime-value customers –
the kind who are more likely to renew their policies
and buy more products from Allstate.
In one 22-state sample, for instance, the share
of new standard auto customers in high-value segments
increased from 28 percent to 43 percent. Retention
rates in those segments are higher. And those
customers buy more, too. In the same study, cross-sell
results were 51 percent more in higher-value segments.
The long-term benefits are obvious: When we lose
fewer customers, we add to total policies in force.
The same is true when we sell more policies to
the same number of customers.
It’s also important to remember that the
impact of SRM is cumulative. Today, customers
priced through SRM represent about 25 percent
of our total business. Within five years, they
will account for two-thirds, and the cumulative
effects will be significant. One example: High-lifetime-value
customers are renewing their policies today at
a rate 1 percent to 2 percent higher than other
customers. Over 10 years, that could mean substantially
fewer defections.
Moving forward, we know profitability, growth
and acceptable returns can live together, even
when the need arises to adapt to different regulatory
and market conditions. In 1998, for example, Allstate
created a separate property/casualty company in
New Jersey to deal with profitability issues.
Today, Allstate New Jersey is profitable and growing.
We’re currently looking at this and other
options in states where we face similar profitability
challenges.
Finally, generating profitable growth requires
that we be highly visible in the marketplace.
That’s why late last year we dramatically
increased advertising and marketing spending,
with a focus on encouraging current single-line
customers to become multi-line customers. We’ll
build on that marketing momentum in 2003 and supplement
national efforts with local plans in key markets.
Chairman’s Message
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