Allstate

Sales Recognition Program: Link to Profitability

In 1985 Allstate began moving its insurance agents out of Sears stores and into neighborhood sales offices. In 1995 Allstate became a completely independent organization in a spin off from Sears. Consistent with these major shifts, Allstate wanted to ensure that its sales offices were taking appropriate steps to manage their profitability. They could do this by marketing to profitable market segments, cross-selling the full Allstate line, and thoroughly supporting underwriting and claims processes and guidelines.

Allstate’s commission structure placed very little emphasis on profitability. Its traditional system paid commissions on sales volume. Although somewhat higher commissions were paid for more profitable products, some top sales offices unfortunately had very low profitability.

While there was interest in adding a profitability component to the core commission system, Allstate’s agencies were still maturing as independent offices, and any change to the commission structure would be highly complex and difficult to implement. Instead, I recommended that Allstate add a profitability component to its annual agent recognition program.

Allstate agency recognition was highly visible. Most agents had memorized the program’s key performance standards. Earning an Allstate ring was often the first career goal set by new agents. This was Allstate’s award to any agent who achieved the first level in the recognition program. Every year thereafter, if the agent again achieved this level, a diamond chip was added to their ring. Allstate agents often brandished their star-studded rings, and accompanying plaques, as proof of their professional success.

Successive levels of performance resulted in greater rewards, from merchandise to regional, national, and international paid vacations. These higher levels were where I directed Allstate’s attention. Although agency profitability had been reported for years, this would be the first time is was specifically rewarded. And, profitability was a more advanced level of agency management.

After extensive modeling we set minimum profitability standards for the higher recognition tiers. Most low-profit / high-sales agencies could achieve these targets after several years of earnest reform of their business practices. Agencies with minimally acceptable profitability were encouraged to enhance their business practices so as to reduce the risk of disqualification due to a small decline in their profitability.

The new recognition program was reviewed with executives and field sales managers. Then the program was launched through a series of regional meetings and associated materials. The program was couched within the context of multiple corporate initiatives to grow Allstate’s share price. Agents took pride in being more closely connected to the larger Allstate picture. 

Allstate’s new agency profitability targets were broadly viewed as reasonable. Better, agency profitability increased.