Allstate’s Innovative Pricing

The automobile insurance market has seen price declines since 2006. During this declining-price period, Allstate has done well, gaining market share by offering innovative pricing.

The company instituted a program called “Your Choice Auto”. It launched this program in 2005, just before industry prices started to fall. This Your Choice program offers drivers a specific benefit in return for a slight premium in the cost of their insurance policies. One option in Your Choice offers a 5% rebate on premiums paid by drivers who remain accident-free during the term of the insurance. A second option in Your Choice is “accident forgiveness.” This option guarantees that the insured’s rates will not go up, even if the customer has an accident. These creative uses of the components of a price have increased Allstate’s market share and profits at the same time.

The two examples in this story change the components of the price by changing the performance benefits and the price simultaneously. There are four other components of a price that also improve revenues and profits. You may find them, in their many variations, in the Improve/Pricing/Brainstorming Ideas on StrategyStreet.

Posted 4/28/08


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