Esurance, Allstate Corp.’s online auto-insurance seller, is turning to the world’s largest retailer to boost policy sales.
The insurer is starting a pilot program tomorrow at 150 Wal-Mart Stores Inc. locations in Illinois to promote Esurance products, according to an e-mailed statement. Customers will get a discount card from in-store kiosks, and can buy the policies over the Internet or by phone.
Allstate, the largest publicly traded U.S. home and auto insurer, is seeking new ways to attract customers as television-ad spending by insurers soars in what McKinsey & Co. has called a “marketing arms race.” The Northbrook, Illinois-based firm acquired Esurance in 2011 to compete with Berkshire Hathaway Inc.’s Geico unit and Progressive Corp., which have added policyholders as more drivers shop online.
“We’re bombarded with so many ads inside the home,” said Brad Adgate, head of research at Horizon Media, a New York-based ad firm that works with Geico. “Unique venues outside the home are one way to get your message across.”
Esurance tapped actor John Krasinski for TV spots and radio ads that began airing in 2011. One ad pokes fun at rivals by asking whether customers should trust car insurance promoted by talking animals. Allstate hired Sanjay Gupta from online bank Ally Financial Inc. last year as chief marketing officer to help build Esurance.
The Wal-Mart program promotes only Esurance, which is run separately from Allstate’s flagship auto and home unit that sells through agents. Danny Miller, an Esurance spokesman, declined to discuss terms of the deal.
Esurance will probably weigh the results of the program in Illinois before deciding whether to widen it, Adgate said.
“If they decide to expand this nationwide, first I think this would be pretty expensive,” he said. “It would be a pretty broad-reach vehicle.”
Miller said Esurance isn’t planning to expand the pilot program in other U.S. markets now. He declined to say how Esurance will evaluate the results.
The Esurance program meshes with Wal-Mart’s strategy to provide customers with “affordable access to everyday money services,” Sarah Spencer, a spokeswoman for the Bentonville, Arkansas-based retailer, said by phone. She said Esurance is leasing space, and declined to disclose other details.
Wal-Mart has been expanding in financial services by offering Bluebird prepaid debit cards, money transfers, check cashing and bill payment in stores. MetLife Inc., the largest U.S. life insurer, began selling prepaid life policies at Wal-Mart stores in South Carolina and Georgia in September, the first time the retailer offered life coverage.
Esurance’s effort recalls Allstate’s roots. The insurer was started by Sears, Roebuck & Co. in 1931 to sell mail-order car coverage. It opened its first sales location in a Sears store in Chicago in 1934, according to the company’s website. Sears sold part of Allstate in an initial public offering in 1993.
Policies in force at Esurance climbed 31 percent to 1.03 million as of Dec. 31 from a year earlier, Allstate said in a report on its website. Allstate’s namesake brand of standard auto coverage lost about 300,000 policies last year. Allstate had climbed 19 percent this year through yesterday, beating the 9.3 percent gain of the Standard & Poor’s 500 Index.
Chief Executive Officer Tom Wilson has said that efforts to boost rates for homeowners’ insurance hurt the ability to retain auto customers, who often buy the policies together.
Auto insurers increased ad spending 15 percent a year over the past decade to almost $6 billion in 2011, McKinsey said in a report in January. Geico’s tab of almost $1 billion that year was the biggest outlay among U.S. property-casualty companies, according to SNL Financial. State Farm Mutual Automobile Insurance Co. spent about $814 million, followed by Allstate, which paid $745 million.
“Given the amount of money that Allstate or other insurers are spending, I’m not sure the incremental TV ad can do that much,” said Paul Newsome, an analyst at Sandler O’Neill & Partners LP. “The next step has to be more creative.”