AllState insurance company

Published on May 2016 | Categories: Types, Research, Business & Economics | Downloads: 43 | Comments: 0 | Views: 747
of 14
Download PDF   Embed   Report

this report is based on the secondary market research



External Analysis of TheAllstate Corporation

Introduction The Allstate Corporation or simply Allstate is an American publicly listed company that specializes in the services related to insurance industry. It operates in four main business lines. These business operations include insurance of life, property, auto and commercial services respectively (one source, 2011).It also offers banking, investment plans and retirement benefits to its customer base. It is one of the largest companies in the United States that offer personal line insurance plans to the wide range of customers. It maintains a strong nationwide network through its various agencies, professionals as well as its help line (Allstate, 2011). It also has its operations in Canada.The company is currently listed at number sixty eight in the Fortune 1000 companies list (one source, 2011). Moreover,The Allstate company is also engaged in various social activities like the sponsorship of various local events like sports events; Allstate bowl, bike race, etc. SWOT Analysis SWOT Matrix The SWOT analysis lists internal strengths and weaknesses and compares them with the external opportunities and threats. The SWOT analysis ofAllstate Corporation is as follows: Strengths y y y Market position Diverse portfolio Credit ratings y y y Weaknesses Little online presence Geographic concentration Low market share

Opportunities y y y Acquisitions Online presence Geographic expansion y y y

Threats Competition Price wars Economic conditions

Strengths Among the large companies operating in United States, Allstate is one of the largest companies operating there that offer personal line insurance plans to the diverse range of customers. It maintains a strong nationwide network through over twelve thousand agencies, professionals as well as its help line(Allstate, 2011).It operates in four main business lines. These business operations include insurance of life, property, auto and commercial services respectively (one source, 2011). It also offers banking, investment plans and retirement benefits to its customer base. The company has received very strong credit ratings from the top notch rating firms in United States (Allstate, 2011). It is among the top insurers in the markets with the market capital of 15.53 billion US dollars, ranked at number two while The Travelers Companies Inc. has a market capital of 24.18 billion US dollars, ranked at number one in comparison with Allstate Corporation (NYSE:ALL, 2011). Weaknesses Despite of the fact that Allstate is one of the largest companies in the United States offering personal insurance plans to its customer base, it too is weak in various grounds. Among the list of its weaknesses is it has very little online presence. With the advent of time, the methods of doing business have become advance. Large number of companies is offering their

products and services through internet to cater the market segments that have little or no access to the physical markets or offices. In this regard, Allstate lags behind its counterpart. Almost every organization is currently offering online services to their clientele. Another weakness of Allstate Corp. is that it has very low geographic diversification. Most of its business operations are directed in United States and Canada. Which means it is vulnerable to the environmental changes like political, economic, social and legal changes in these countries. Lastly, the company is operating in United States since 1931 but it has very little market share in the US markets. According to the review on Allstate by Free Advice (2011), it has around eleven percent market share with State Farm at number one with around nineteen percent market share respectively. Opportunities There are large numbers of opportunities available to Allstate Corporation. Among the available opportunities is the geographical expansion. It has no geographic presence in the countries that offer great growth opportunities to the companies operating there. Allstate can expand its business portfolio in the emerging markets of Asia like China and India. These countries promise growth opportunities to the large number of companies operating there. Another opportunity available to Allstate Corporation is to engage in the business mergers or acquisitions activities. These activities can give a competitive advantage to the company over its competitors in the markets. As already mentioned in the weaknesses, Allstate have very little online presence. It can improve its online presence by offering online services to its large range of customer base in the national as well as international markets. This will increase its market presence to many folds and the company will also be able to face the stiff competition given by its counterparts.

Threats The insurance markets in United States are highly competitive in nature with a large number of market players offering wide range of products to the nation. Allstate faces stiff competition with these players. The top three competitors of Allstate Corporation areFarmers Group, Inc., The Progressive Corporation and State Farm Mutual Automobile Insurance Company respectively (Hoovers, 2011). Another level of threat to the company is the recession in the United States Economy. The downfall in the US economy has touched all the levels of business and lives of people. It has severely affected the companies operating in the domestic markets and the demand of the customers. The demand is dependent on the demographics of the customers and the commercial requirements that affect their needs. The consumers are required to buy auto insurance and rental insurance by the government and lenders. If these economic conditions continued to prevail, then Allstate will likely to suffer huge losses in the coming years (USSEC, 2011). Another possible threat faced by Allstate is the changing regulations by the US government for auto markets. The government of United States has mandated insurance of vehicles and drivers. The recent regulations involve the auto insurance based on the safety records of driver, the mileage driven and the experience of driver in driving respectively (Car Insurance rates, 2011).

PESTEL Analysis

The PESTEL analysis contains the analysis of Political, Economic, Social, Technological, Environmental and Legal environments of a country with reference to a particular object. The PESTEL analysis ofThe Allstate Corporation is as follows: Political The federal law prohibits companies to make contributions in the political activities and federal candidates; Allstate Corp. makes contributions to the parties where it has liberty to make corporate contributions. The US Supreme Court has drawn restrictions on the corporate spending on the political activities. Like the other companies of its league, Allstate is involved in the political contributions via its political action committee called Allstate PAC. Allstate strives to demonstrate its commitment for the public health and care by making sure that it is able to add its voice at the time of devising public policies. Through its political action committee, Allstate Corporation has spent over seven hundred thousand US dollars in the year 2010 for making political contributions to the wide range of national and state level parties (open secrets org, 2011). The political action committee of the company has spent over one million US dollars for the year 2010 in the favor of Democrats party (open secrets org, 2011). The company has also given donations to over five hundred groups including more than fifty thousand US dollars for the year 2010 (Center for Political Accountability, 2010). Economic The economic conditions of a country play an important role on determining the success and failure of a company. Since, most of the functions of Allstate Corporation are directed in the domestic markets of United States, so its likelihood of getting hit by the economic changes and governmental ruling is high. The downfall in the economy of United States has adversely

affected large number of organizations operating in United States and increased the opportunity costs associated with their business segments and operations. Moreover, these declining market conditions have increased the unemployment rate in the company. According to the CEO of Aetna Inc. the government is been trying to raise the level of employment in the country but this has no significant or direct impact on the health care industry. The economic conditions of the country still seem to be troublesome for large number of companies (Sturdevant, 2011). The declining business and market conditions can severely impact the business operations of the company in the form of consumer behaviors, investment pressures, and weakening financial markets respectively (USSEC, 2011). Social Allstate Corporationis effectively engaged in the social and community related activities in order to raise the living standards of people in the communities it operates in. The company believes it is very important for the success of the company, its employees and policy makers to understand the needs and requirements of the communities they operates in. the company follows diverse culture all over its business units (Allstate, 2011). The social responsibility report communicated by the company divides its corporate social responsibilities in three ways: responsible business practices, commitment to the community involvement, and commitment to the social impact of the company. In order to achieve the community involvement, Allstate has divided the communities in three main groups local communities, hometown- Chicago Metro Area and National communities with the help of various non-profit organization and institutions working for the improvement of communities. Allstate has established Allstate Foundation to serve the needs of

people from these communities. They help these people by volunteering time, financial resources and offering social help to them (Allstate, 2011). Allstate is an equal opportunity employer where large number of employees hired in the company is from local communities including over fifty eight per cent female employees and over thirty percent minorities respectively (Allstate, 2011). Technological The technological advancement is vital to the success of a company in today¶s competitive environment where large numbers of counterparts are ready to snatch the market share of a company. The business operations and processes are significantly dependent on the latest information technology systems. The Allstate Corporation has implemented the latest information technology systems to facilitate the flow of information within the offices and all the other business divisions (Allstate, 2011). According to the reports communicated by Schelmetic (2011) Allstate has purchased the Esuranceto expand its online presence in order to facilitate larger number of customers seeking auto insurance facilities online. Likewise, they have bought Answer Financial, quotations related software, as well in order to facilitate the clients to compare the financial quotes online and buy insurance through their websites. Environmental Like the other entire responsible corporations in the markets, The Allstate Corporation is also engaged in the activities that foster the environmental safety. The environmental policy of Allstate explains its objectives that ³At Allstate we have established policies and programs to reduce the direct impact of our operations on the environment and to promote the safety and

health of our employees´(Allstate, 2011).It has started number of activities in order to minimize its impact on the environment and atmosphere. Among its initiatives includes reduced energy use, recycling of paper, saving water at its facilities.

Legal In order to maintain its market position and its license to operate in the markets of United States, Allstate has to comply with the local, regional, state and federal level rules, regulations and laws. Allstate is subject to various legal proceedings currently in pipeline. Some of the legal proceedings against the company include: policy change claims for homeowners (Progressive Direct, 2007), auto insurance cases (Griffin and Johnston, 2007), class action law suits for worker rights and human rights issues (Know more org, 2011), Raymond Corbett, Clifton Smith,and Nora Albaughvs. The Allstate Corporation (class action law suit, 2000), bad faith insurance complaints and various other class action cases were held against the company.

Porter¶s Five Forces Analysis

Porter¶s Five Forces Analysis helps the managers to understand the market position and the effectiveness of business strategies of a firm with reference to five micro and macro level environments (Porter, 2008). These five forces include Competition, New Entrants, and Buyers Power, Suppliers Power and Substitute Products and/or services respectively. The Five Forces Analysis for The Allstate Corporation is as follows:

Rivalry among established competitions The level of competition among the existing competitors in the industry is very stiff. The main competitors of Allstate Corporation are Farmers Group, Inc., The Progressive Corporation and State Farm Mutual Automobile Insurance Company respectively (Hoovers, 2011). In the health insurance industry, the customer demands are associated with the increasing costs of medical options available to them. The market success and profitability of the firms operating in the industry is dependent on their operations and their ability to obtain favorable contracts with the medical and health care personnel (Hoovers, 2011). Bargaining power of suppliers The bargaining power of suppliers is derived by their power to demand the prices of their own choice. The supplier¶s power in the insurance industry is not a big threat to the companies operating in it. But the threat suppliers taking away human capital does exist in the industry. This industry is entirely based on the human capital.

The bargaining power of buyers The individual buyers do not have much power to influence the insurance industry at large. The large corporate clients and other related businesses pay large sums of money as health insurance premium to these companies. These market players in the insurance industry long to get high margin corporate clients.

The threat of substitute products or services The threat of substitutes is very high in the insurance industry as there are plenty of substitutes available in the market. Many of the firms offer the services that are similar to that of large companies. There exists high level of competition on all the grounds whether it is auto

insurance or health insurance. There are companies operating in the markets that offers unique products and services to their customers and have competitive advantage over their counterparts which depends on the size of their business segments.

The threat of the entry of new competitors

The industry imposes certain barriers to the entry of the new companies in the markets. This means that the level of threat of new entrants is relatively low in the industry. There are varying reasons to the low rate of entry. Among them is the entry barriers imposed by the industry. The new entrants will have to comply with the governmental regulations in order to make their entry in the markets. Then the existing players are protected by the number of barriers which makes it difficult for the new entrants to give hard time to them. Among them are: entry restrictions, tariff rates, high capital requirement, distribution channels etc. These barriers limit them to compete against the existing market players.

Recommendations This study provided brief overview on the external environment analysis of The Allstate Corporation. The findings of the study suggested that Allstate Corp. should focus on the following factors in order to excel its business and social image in the world: 1. Allstate can increase its market share by improving its existing operations in the domestic and international markets. 2. It can expand its business in the emerging markets like China and India to obtain maximized profits and sales

3. Improvement in the community and environmental activities are required for the company¶s face saving activities in order to wash out the effects of legal proceedings against the company. 4. It should differentiate itself, its products and services from that of competitors by reinventing their business operations.

References Allstate (2011) Allstate at a glance, retrieved on July 15, 2011 from (2011) Community Involvement, retrieved on July 15, 2011 from (2011) Diversity, retrieved on July 15, 2011 from (2011) Environment, retrieved on July 15, 2011 from Car Insurance Rates (2011) Mandatory Car Insurance Laws - Fines and Penalties for Not Insuring Your Auto?, retrieved on July15, 2011 from

Center for Political Accountability (2010) Political Transparency and Accountability Profile (2010): The Allstate Corporation, retrieved on July 15, 2011 from Class Action Complaint (2011) The Allstate Corporation, retrieved on July 15, 2011 from Griffin, D., and Johnston, K., (2007) Auto insurers play hardball in minor-crash claims, CNN, retrieved on July 15, 2011 from

Free Advice (2011) Allstate Review, retrieved on July 15, 2011 from Hoovers (2011) Competitive Landscape, retrieved on July 14, 2011 from Knowmore Org (2011) The Allstate Corporation, retrieved on July 15, 2011 from NYSE:ALL (2011) The Allstate Corporation, retrieved on July 15, 2011 from

One Source (2011) Fortune 1000 companies list, retrieved on July 14, 2011 from (2011) Allstate Corporation, company profile, retrieved on July 14, 2011 from Open Secrets Org (2011) Allstate Insurance Corporation, retrieved on July 15, 2011 from Porter, M. E., (2008) The Five Competitive Forces that Shape Strategy, Harvard Business Review, p.86-104, retrieved on July 14, 2011 from Progressive Direct (2007) Home Insurance 9-1-1, retrieved on July 15, 2011 from Schelmetic, T. A (2011) Insurance Technology - Allstate Buys Esurance to Expand Online Auto Insurance Presence, retrieved on July 15, 2011 from Sturdevant, M. (2011) Aetna CEO: Drop In Jobless Rate Hasn't Boosted Health-Plan Enrollment, retrieved on July 15, 2011 from

USSEC (2011) The Allstate Corporation, Form 10-k, retrieved on July 15, 2011 from y5jb20vZG9jdW1lbnQvdjEvMDAwMTA0NzQ2OS0xMS0wMDEyODYvZG9jL1RoZUFsbHN 0YXRlQ29ycG9yYXRpb25fMTBLXzIwMTEwMjI0LnBkZiZ0eXBlPTImZm49VGhlQWxsc3R hdGVDb3Jwb3JhdGlvbl8xMEtfMjAxMTAyMjQucGRm (2011) The Allstate Corporation: Risk Factors, Form 10-k, retrieved on July 15, 2011 from y5jb20vZG9jdW1lbnQvdjEvMDAwMTA0NzQ2OS0xMS0wMDEyODYvZG9jL1RoZUFsbHN 0YXRlQ29ycG9yYXRpb25fMTBLXzIwMTEwMjI0LnBkZiZ0eXBlPTImZm49VGhlQWxsc3R hdGVDb3Jwb3JhdGlvbl8xMEtfMjAxMTAyMjQucGRm

Sponsor Documents

Or use your account on


Forgot your password?

Or register your new account on


Lost your password? Please enter your email address. You will receive a link to create a new password.

Back to log-in