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Esurance brand gets 'surprisingly painless' refresh amid return to growth mode


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Esurance brand gets 'surprisingly painless' refresh amid return to growth mode

A new advertising campaign featuring actor Dennis Quaid seeks to position Esurance Insurance Co. and its affiliates in a new way just as the Allstate Corp. subsidiaries have started to show the sort of momentum in certain key measures of growth to which management had previously alluded.

The "surprisingly painless" ads, which began appearing across a range of media Aug. 20, highlight the ease of doing business with the direct-to-consumer writer when it comes to everything from applying for a new policy to filing a claim. Esurance had long used the tagline "insurance for the modern world" in its advertising, which serves as a key driver of business growth among direct personal lines companies.

Allstate began to ramp up the relative amounts it had been spending on Esurance-brand advertising in recent quarters as financial results continued to show improvement. The contribution of advertising costs to the expense ratio for the Esurance brand bottomed at 6.7 points in the fourth quarter of 2017, then increased to 8.1 points in the first quarter of 2018 and 8.6 points in the second quarter.

Since Allstate acquired Esurance in the fourth quarter of 2011, the relative contribution of advertising costs to its expense ratio peaked in the first quarter of 2014 at 28.3 points. The second-quarter result remains below the average relative contribution of 13 points during Allstate's 26 full quarters of ownership. But in addition to the successive sequential increases, it marked the first time since the third quarter of 2016 that the contribution did not decline on a year-over-year basis.

In turn, Esurance has posted two consecutive quarters of year-over-year growth in new issued auto applications, a feat that the brand last pulled off in the second and third quarters of 2013. Year-over-year growth in auto policies in force, which had eluded Esurance for a stretch of 10 consecutive quarters, returned in the second quarter as the brand's auto policy count of 1.43 million marked an increase of 3.2%. Sequential growth in auto policies in force of 3.5% in the first quarter and 2.4% in the second quarter represented the first time since the first quarter of 2015 that the Esurance brand experienced growth in that manner in consecutive reporting periods.

Aided by several quarters of auto policy renewal ratios in excess of 80% and year-over-year growth in average gross premiums written per policy in the mid-single digits, Esurance auto net premiums written expanded by 11.4% in the second quarter. That represented the brand's first quarter of double-digit year-over-year growth in that statistic since auto net premiums written rose by 12.4% in the fourth quarter of 2014.

Allstate officials indicated on various occasions at the start of 2018 that they expected Esurance to show policy growth during the year. Three consecutive quarters of sub-100% underlying combined ratios in Esurance-branded business through the second quarter, excluding the impact of catastrophe losses, prior-year reserve development and the amortization of purchased intangible assets, likely added to their comfort level in pursuing expansion. Esurance generated underlying combined ratios in excess of 100% during each of Allstate's first 23 quarters of ownership.

An expansion into homeowners insurance helped the Esurance brand post more favorable year-over-year trends in policies in force on an overall basis than in the auto business alone. The company reported a new high of approximately 88,000 homeowners policies in force in the second quarter, up approximately 27.5% from the year-earlier period.

As Esurance moves into growth mode, two of its most prominent direct-to-consumer auto insurance peers have continued to improve their relative positioning in the marketplace.

Policies in force in Progressive Corp.'s considerably larger direct auto business soared by 16.8% in the second quarter, marking its fastest growth in any quarter in more than 14 years. And though voluntary auto new business sales at Berkshire Hathaway Inc.'s GEICO Corp. slumped by 9.3% in the first half of 2018, facing a difficult comparison from the record growth it posted a year ago, the company's voluntary auto policies in force increased by 4.9% year over year.

While Esurance's share of the private-passenger auto market increased to 0.7% in 2017 from 0.5% in 2011, both the Progressive Direct companies and United Services Automobile Association, a company Allstate has previously characterized as a direct channel Esurance competitor, added more than one full percentage point to their relative positions. GEICO's market share of 12.8% in 2017 represented an increase of nearly 3.8 percentage points since 2011. Allstate as a group ranked as the nation's No. 4 private auto insurer in 2017, down from No. 2 in 2011 both with and without Esurance.