To:



To: Douglas Lamont, Ph.D.

Marketing 555: Decisions in Marketing Management

DePaul University

The Charles H. Kellstadt Graduate School of Business

The Marketshare and Marketspace of Allstate

Tapping the Potential of Generation X

Executive Summary

The ability to offer “peace-of-mind” and future security for the unexpected has brought global recognition to the value of insurance. In an industry perceived as slow to change, traditional products associated with the stereotypical evil or nuisance of insurance need to be adequately addressed and overcome. The perception of an annoying agent permeates much of the population’s beliefs when thinking about insurance. With the advent of a competitive Internet market, individuals are capable of purchasing any product for which they are willing to pay a premium. Potentially, this includes products that may not be in the best interest of the customer. We believe Allstate is in a unique position, with both its agent force, and variety of product offerings, to take advantage of competitors in the market.

We are anticipating an untapped market exists in the Generation X cohort, specifically those aged from 25-32 years old, highly educated, and professionals. Apparently, many insurers believe this market to have relatively little disposable income and therefore, relatively no need for product offerings. As we hope to contest this perception, our strategy focuses on both immediate and long term results. Numerous studies by the NAIC, LOMA and other affiliated insurance periodicals identify the degree to which this market is underserved. Many of these individuals are just beginning to experience major life changes such as first home purchases, child rearing and marriage. All of these events lead to concerns over how these assets are protected.

Our product offering will be presented in a two-fold financial service approach, focusing on both the current economic standing and anticipated needs of the cohort consumer. Allstate’s early entry to the financial consciousness of the cohort will begin a lifelong advisory relationship that may be leveraged upon current and future life changes and economic concerns. Some of these individuals will be financially concerned about the returns found in the stock markets; conversely some will have concerns about their families well being in the consequence of an unforeseen event. The products Allstate specifically offers, in both term life and variable annuity contracts, can be used to stimulate the future financial potential of this cohort. We have outlined how this strategy can be delivered with existing resources, where enhancements could be implemented and where the customer, agent and company mutually benefit from the transaction.

Our key points and recommendations follow. The full text of the study can be found in the attached document.

Generation X has financial potential that needs to be recognized and developed as its needs change. The Internet offers an additional channel to attract this cohort.

Agent relationships are threatened by the advent of e-commerce. A happy medium needs to be identified where the agent continues to serve the best interests of the customer and company while maintaining their role as an advisor.

We anticipate the population of this cohort to sustain temporarily in the variable market and increase in percentage for term insurance.

Generations Consulting Group

Jay Bankoff ________________________ ___________

Andrew Gluck ________________________ ___________

Reda Lebita ________________________ ___________

Michael McNeill ________________________ ___________

Review of Target Group Demographics

The group that we will be marketing our Allstate Insurance term, or variable annuity (VA) life insurance products to are those that turned 20 years of age in the 1990’s. More specifically, our targeted group within that age-period cohort group are those that are between the ages of 25-32, who are professionals, who are married (or are thinking about it), and who have children, or soon will. We see a need for these products within this group because many of these young professionals now have obligations and responsibilities that they didn’t have just a few years before. With a spouse and children now in the picture, a strong responsibility to the welfare of one’s family becomes an important issue. Although we are targeting professionals whose income is proportionately higher than others in this age group, their disposable income is not as high as one might think. With student loans to pay off, as well as mortgage payments, car payments, and the like, these people are looking for a means of protection, but one that fits within their budget.[1] Therefore, by offering these two different products, we will be giving our targeted group a choice as to what means they want to use in order to meet their objectives.

Term life is a more conservative product that provides death-benefit protection for a specified period of time. A variable annuity, on the other hand, provides the individual with an investment vehicle, very similar to a mutual fund, but that will provide death-benefit protection to one’s family should they need it.[2] Because there are many insurance companies, as well as other financial service operations, who are all lobbying for the business from this age group, Allstate must be aggressive in reaching these people. With so much competition for this business, not only is providing a superior product of the utmost importance for Allstate, but providing superior customer service will likewise be essential in initiating, and maintaining these relationships. The Allstate representatives must instill peace-of-mind to their policyholders in order to ensure them that they are “in good hands.”

MARKETING MIX: THE 4 P’s

Product

The products we have chosen to focus on are Allstate’s term life, and variable annuity insurance policies. These two products provide the policyholder with varying degrees of protection and benefits. Term life is usually sold on a shorter-term basis where a monthly premium is paid to Allstate. Should that person die, the family will receive death benefits that were agreed on, upon constructing the contract. Two benefits of a term life policy are that the up-front costs are considerably less than that of a VA, and should the policyholder die, his/her family is protected. Therefore, the peace of mind that many people in this age group are looking for in a life insurance policy is achieved through term life. One of the major drawbacks of term life, in comparison to a VA, is that once the premiums are paid, there is no pay back period. In that light, term life is less expensive, at least as far as up-front costs are concerned, but much like renting a house instead of buying, the equity paid out is never returned to the policyholder. With a VA, not only does the policyholder receive death-benefit protection, but they also receive retirement benefits as well.

A variable annuity allows the policyholder to make an initial lump sum payment, with consequent payments, into what is essentially a mutual fund. With this insurance vehicle, the policyholder has discretion as to where his/her funds are allocated. Should the equities market become too volatile for one’s comfort level, he/she is allowed to transfer funds into cash, or bonds. Furthermore, a VA provides a source of income for retirement. Previously invested funds are paid out as annuities once the policyholder becomes a certain age, which is decided upon when the policy is constructed (usually any time after the age of 59.5). Because there is often an early withdrawal penalty for removing funds from a VA before that time, re-allocation, instead of “jumping ship,” is usually the most efficient way in which to avoid excess market volatility. Furthermore, the unfavorable tax treatment of capital gains received from a VA (they are taxed as income, not long-term capital gains, up until the age of 59.5, where they are then taxed at the 15% retirement rate), further discourages the policyholder to withdraw any money before it is necessary. Therefore, the risk-averse investor would probably find more safety in a term life policy. Similarly, one without at least a ten to twenty-year time horizon should also look to term life as opposed to a VA. As Kevin Gough, assistant vice president of insurance research and publications at Conning & Co. states, “… there are two kinds of investors: market timers and those that are in it for the long haul. The first group need not apply…”[3] The fact that our target group is so young, we believe that their time horizon will be conducive with that suggested when investing in a VA.

Effective marketing of these products requires aggressive promotion through personal representatives, as well as the use of the Internet. Not only must Allstate have a developed web site where people can conduct research on their products, but strategically placed advertisements and links to the Allstate web site via other web sites (e.g. Yahoo) is likewise essential in steering people to their products. Furthermore, the marketing strategy will have to emphasize the abilities of the Allstate representatives to deliver sound advice given the individual family’s needs. Allstate’s “house-hold name” and reputation will also be a significant contributing factor in attracting new business.

Price

The insurance industry is heavily regulated, especially when it comes to prices charged for its products. As the industry is very competitive, pricing decisions may be the focal consideration in penetrating our proposed target market. The premise of pricing decisions with regards to term and variable annuity life insurance products is to effectively convey the value of Allstate products as they relate to the target market’s perception of their related prices.

Last November 1999, Allstate unveiled its “New Business Model,” which specified the company’s plans to directly sell insurance products via the Internet as well as an 800 number.[4] This strategy results in agents’ commissions being waived or drastically lowered. For term life insurance, this means a reduction in insurance premium payments by approximately 30-35% for the first year and by approximately 5-7% in succeeding years (or a uniform reduction of about 7-10% for 10 years)[5]. In addition, depending on the length of the annuity, this model will result in a reduction of 2-12% for annuity premium payments.[6] Consequently, this strategy will allow Allstate to become more competitive with other life insurance companies.

As a point of comparison, below are two 10-year, $100,000 term life insurance quote comparison tables for male and female, both age twenty-six, relatively healthy, smoker and non-smoker:

Table 1: Non-Smoker[7]

|Company |Initial Monthly| |Rate Guarantee |S&P Rating |Assets |

| |Premium | | | | |

| |Female |Male | | | |

|The MONY Group |$8.75 |$9.19 |10 Years |A+ |$22 Billion |

|Western Southern Life |$8.50 |$10.50 |10 Years |AAA |$18 Billion |

|G.E. Financial Network |$6.82 |$7.70 |10 Years |AA |$8.9 Billion |

|C.N.A Life |$9.48 |$10.01 |10 Years |AA- |$13 Billion |

|Allstate Life Insurance |$9.94 |$9.94 |10 Years |AA+ |$29.1Billion |

|New Business Model [8] |$8.95 |$8.95 |10 Years |AA+ |$29.1Billion |

|Zurich Kemper |$7.83 |$8.61 |10 Years |AA+ |$15.6 Billion |

|Ohio National Financial |$8.10 |$8.81 |10 Years |AA |$8.2 Billion |

Source: InsWeb Term Life Quotes, secure1.cgi-bin/termlife.exe, Date of Search: 6/27/00

Table 2: Smoker[9]

|Company |Initial Monthly| |Rate Guarantee |S&P Rating |Assets |

| |Premium | | | | |

| |Female |Male | | | |

|The MONY Group |$13.43 |$15.43 |10 Years |A+ |$22 Billion |

|Western Southern Life |$13.50 |$16.50 |10 Years |AAA |$18 Billion |

|G.E. Financial Network |$11.46 |$13.82 |10 Years |AA |$8.9 Billion |

|C.N.A Life |$15.66 |$17.31 |10 Years |AA- |$13 Billion |

|Allstate Life Insurance |$17.51 |$25.75 |10 Years |AA+ |$29.1Billion |

|New Business Model [10] |$15.76 |$23.18 |10 Years |AA+ |$29.1Billion |

Source: InsWeb Term Life Quotes, secure1.cgi-bin/termlife.exe, Date of Search: 6/27/00

After comparing the insurance quotes from these different companies, for all profiles, the traditional Allstate prices were one of the most expensive when term life insurance policies were sold through agents. With sales done directly through the Internet or the 1-800-ALLSTATE number, insurance premiums are effectively reduced by about 10% less than the traditional prices. It should be noted, though, that even if Allstate were to reduce its prices, and thereby become more competitive, its term life insurance is still priced relatively more than some companies. However, due to their good brand, their reputation as an industry leader, and their efficient and accessible customer service, Allstate is confident that people will be willing to pay the slightly higher price. For that slightly higher price, customers receive Allstate’s excellent customer service, as well as their new 24-7 Client Information Centers, which, with the exception of perhaps State Farm, are unparalleled in the industry.[11]

Promotion

The purpose behind sound promotional decisions is to efficiently communicate variable annuities and/or term life insurance products to our proposed target market. The promotional decisions assume that we, as consultants, can utilize the current network of agents that Allstate has. In addition, as part of brand recognition and the New Business Model, Allstate launched a new advertising campaign that focuses on actual employees, agents and customer service stories emphasizing the slogan, "You're in Good Hands with Allstate." The various ads air on different television spots and are featured in different print media. For the promotional campaign to the target customers, we recommend freeloading on the television exposure of the Allstate brand. We believe that the brand is being competently represented in television media. Our proposed strategy will be in line with Allstate’s brand essence of professional agents, financial stability, superior claim handling, and friendly, helpful employees. As an enhancement to this essence, we will portray Allstate as dynamic and proactive in meeting customers’ needs by introducing the direct alternatives of doing business with Allstate.

Upon careful consideration of our target market, proposed products, and Allstate’s current strategies, we believe that the, “Hierarchy-of-Effects Model,” is the best strategy in which to apply to our proposed promotional strategies. [12] Below is our analysis of the model as it pertains to our proposition:

The current Allstate slogan, “You’re in good hands with Allstate,” exhibits both an emotional and rational appeal. It stirs positive emotions of security and dependability. Our value proposition will present Allstate products as sound investments, allowing secure protection, with competitive prices and backed by qualified Allstate representatives.

Our specific promotional strategy will concentrate on the Internet and print media. This strategy is based on the assumption that our target customers are Internet friendly, independent, value oriented, and educated. The assumption also supposes that Generation X’ers ages 25-32 are thinking of getting married, already married and have, or are planning on having kids, or are single, and looking for investment choices for retirement. With Allstate’s plans of selling through

the Internet and/or their 1-800 number, we believe that target customers will be drawn to examine the Allstate products when these choices are brought to their attention. We believe that TV media’s drawing power will be relevant to Allstate’s brand campaign, hence, we do not propose the use of TV media in promoting these insurance products to our target market. We do not want to confuse the target (and other existing or potential) customers with our new strategies.

According to SRDS Interactive Advertising Source Online, the top magazines read by men and women ages 25-32 are: Parent’s Magazine, Child, Men’s Journal, Healthy Kids, Parenting, Muscle and Fitness, American Baby and Parent & Child.[13] We also propose to include occasional advertisements in Forbes or Fortune Magazines in order to tap into the single Generation X’ers who are looking for investment alternatives. The inclusion of Allstate’s 800 number access as well as an Internet site alternative will allow these potential customers to research the term and variable annuity products on their own. They can also take advantage of the advice of trained agents and certified insurance representatives who are available 24 hours a day, 7 days a week.

Leading Internet sites geared towards our targeted age group include, , , , , AOL Families channel, etc. We also propose to include search engine sites like , fitness sites, and online investment sites such as in our consideration. It should also be noted that Allstate recently announced a joint venture with Putnam Investments to sell annuities.[14] Our proposed campaign can benefit from this partnership especially in tapping into our target customers who are more investment conscious. For all of these Internet sites, banner ads will be featured that will directly link people to the Allstate Internet site, which features the 1-800-ALLSTATE alternative avenue.

Allstate’s term and variable annuity life insurance products will be promoted as sound investments as well as strong protection for the occurrence of the unexpected. We believe that Allstate is in a strong position to tap the Generation X’ers, educate them about the benefits of these life insurance products, and effectively turn them into satisfied customers.

Distribution Channels

The mechanisms for the distribution of life insurance products is facing a period of dynamic change brought about by the breaking down of the traditional market segmentation in the financial services industry. Banks and brokerage houses are emerging as a major marketer of annuities and insurance. With their established distribution networks of branch offices and brokers, they have become competitive threats to insurance companies. At the same time, the demographics of the customer base have changed. Consumers in the Generation X market have a heightened awareness of the need to save for retirement, as well as the probability of living longer and possibly exhausting their financial resources. They are busy professionals who are technology-savvy and use information they obtain on the Internet to help them plan for their financial future. Insurers will have to counter threats to their competitive position in the marketplace by offering customers superior service and convenience, and by reevaluating their product mix and distribution channel strategies. By using new technologies, insurers can also operate in the most cost-effective manner.

Traditionally, life insurance companies have used three methods of distribution:

The agency system consists of representatives of the insurance company negotiating, selling, and servicing life insurance policies. Agents can either be “independent” (selling products from many insurers), or “captive”(employees of one insurer). Sales of insurance policies occur primarily in the agent’s office.

Home service representatives constitute a small percentage of industry business. These individuals collect premiums at the home of the insured either on a weekly or monthly basis.

This method tends to be costly and inefficient.

Direct response methods of selling insurance are more cost-effective. Employees of the insurance company interact with potential customers directly through phone solicitations, mass mailings, or television advertisements.

The use of information technology in the life insurance industry has been primarily limited to office personal computers, local area networks, and some automation of mass mailing advertising campaigns. According to a recent study done by Corning and Company, only 10% of high-level insurance executives rate their distribution systems as being effective; only 8% felt that the life insurance industry was adequately utilizing the potential of the Internet. More than 50% felt that the Web will be an effective distribution channel in the next three to five years.[15] Another survey by Anderson Consulting revealed that executives in these companies expect to see significant changes in the distribution of asset accumulation and wealth protection products because of the introduction of e-commerce transactions over the next 5 years. They foresaw the Internet allowing insurers to reach new groups of customers not served by existing distribution channels, and the use of web sites to support the increasing efficiency of existing channels. They predict that on-line sales will take market share away from traditional distribution channels. This competition will increase price pressure, reduce commissions for sales, and lead to a reduction in the number of brokers and agents.[16]

These changes will challenge the traditional assumption that insurance is sold by agents, not bought (or aggressively sought out) by customers. Consumers will reward companies that best suit their needs in terms of convenience and price. They want to be able to access the kind of high quality information, which demystifies insurance products and allows them to make price comparisons between brands. Many insurance companies, including Allstate and Metropolitan Life, already have web sites which allow customers to obtain information about policy options, get an on-line rate quote, monitor the status of a claim, fill out insurance forms and change the beneficiary of a policy. Web companies like QuickQuote and QuoteSmith use their data mining capabilities to sift through vast amounts of information and retrieve the least expensive term policies that meet a set of requirements. Insurance “malls” like InsWeb and InsureMarket also give comparative information about policies, but only about companies who pay a fee to be listed with them. We believe that Allstate should develop strategic alliances with these companies, both so that consumers are made aware of their product offerings, and so that their customers will have access to information about the pricing of insurance premiums across the industry.

Allstate has taken notice of the industry-wide trends, and is making a large commitment in integrating Internet and call-center access with its dedicated agency force by establishing the Allstate Client Information Center. Eventually, their new business model will allow customers to purchase a full range of products and services over the Internet at a time and place which is most convenient to them. They will be able to call a 1-800 number and obtain answers about Allstate’s product from a customer support representative 24 hours a day. If they desire to be contacted by an agent, a local agency will be assigned to them. Allstate should continue to differentiate itself in the marketplace by offering customers all three access methods in an integrated fashion.

Sales and Marketing Efforts

The target group for the sale of Allstate’s insurance products are 25–32 year olds, many of whom have above-average household incomes, are homeowners, and more than half of which have young children at home. This generation tends to be skeptical and pragmatic, focused on saving and investing hard earned dollars for future economic security. They have little faith in the ability of the Social Security system to support them when they reach retirement. They want to have control over their investments and be self-reliant. They consider the Internet to be an important source of information.[17]

Allstate’s sales and marketing strategies must cater to the natural tendencies of their target market group. Universal and variable life insurance policies can be marketed as attractive long-term investment vehicles. Life insurance policies which are bought for small children can be purchased for low premiums and will help ensure a baby’s future well being.[18]

New advances in technology can help us improve our operations in several ways. E-commerce marketing can help improve consumer access to our products as well as the efficiency and effectiveness of our sales operations. Traditionally, sales have taken place in the agent’s office, the customer’s home, or through direct-marketing communications. With the advent of electronic commerce on the World Wide Web, transactions can take place 24 hours a day without human intervention. Electronic data exchange (EDI) can improve the efficiency of these transactions by providing a mechanism for buyer and seller to download and upload policy information or forms. Fewer errors will be made in processing because data does not need to be re-keyed as it is transferred between insurers and agents. EDI can also help insurers exchange information with service providers and third party customer service centers. The most cost efficient service providers can be located by utilizing pricing information obtained over the Internet. EDI can be used to report statistical and financial information to regulators and statistical agents. Financial transactions, including premium and benefit payments, can be made using secure credit card transaction servers and direct deposit through electronic funds transfer.[19] Browser based applications which administer the back-office administration functions of insurance companies have been developed recently, including the SOLCORP/INGENIUM 6.0.[20]

Information collected from visitors to Allstate’s web site can also more effectively be used to make underwriting decisions, identify the customers with the most marketing potential, and customize the company’s services for each individual consumer. Some insurers have already implemented ‘expert systems,’ computer programs which can make underwriting decisions in the same way that human experts can, freeing staff to focus on more complex matters.[21] Companies like Progressive Insurance, use customer information and advanced algorithms to establish profitable pricing strategies for customers who are systematically categorized based on the information they provide.[22] Sybase Corporation has developed software specifically designed to support data mining and customer relationship management for the life insurance industry which features rapid analysis of selling trends and a Web-enabled sales tool for agent’s laptop computers.[23] Web-based insurance services can be personalized for each customer based on the preferences they indicate and their current insurance portfolio. This information can be stored in on-line databases. Increasingly, insurance companies like The New England, Boston, and Charles Schwab are using a context strategy to secure life-long customer relationship, and Allstate should aggressively pursue this technique. These strategies include appealing to nostalgia or self-reference criteria to create a marketing “experience” for a targeted group of individuals through new channels designed to appeal to them. These channels include the Internet, interactive TV, screen phones and financial service products.[24] Allstate can provide a mechanism for purchasing variable annuities and term life insurance policies over the Internet, increasing convenience for its customers and potentially increasing its market share.

Stress Implementation

Variable annuities and term insurance products exist as part of Allstate’s current life insurance offering. However, this particular cohort has not been directly solicited by the industry in an attempt to generate current and future profits.[25] Since Gen-X’ers have a reputation of selectivity, the way in which the products are offered will be a primary determination in the success or failure of our business endeavor.[26] This cohort does not have a genuine recollection of poor market performance, and, as a result, they have faith in the gains to be extracted from the market. Allstate will need to adjust their offerings in order to allow greater flexibility to the customer (i.e. design/change funds supporting the annuity). Term insurance should be a compliment to the other services offered by the company.[27] Term should follow competitive market premiums for the coverage offered.

Distribution of our product offerings will also permit Allstate to penetrate into the cohort’s mainstream of financial thinking.[28] Ultimately the more flexible, or customizable, the product, the more likely it will appeal to this group.[29] To ensure our customers receive premier service levels, considerations will need to be made on the eventual impact to the 15,000 Allstate agents.[30] Variable annuities are contractual obligations that are currently not available for purchase on-line. Specific National Association of Insurance Commissioner (NAIC) guidelines prohibits such a complex product from being offered without appropriate illustrations of the costs associated with an annuity. However the use of the Internet does provide a significant entrance for the Gen-X consumer to review their insurance options. Any commission costs will be collected on application generation from the first principle payment.

Allstate’s website will need to be enhanced to allow potential customers the ability to compare and contrast the options of the annuity product and term insurance. Customers should be able to weigh both the positive and negative aspects of each insurance offering. The customers can indicate interest in a purchase by submitting an application request via email to a database. The database can be queried to disseminate the information to the appropriate geographical agent for follow up.

Term insurance contracts are currently the best selling product in Allstate’s portfolio. The low premiums and relatively high coverage amounts make this product extremely attractive to our cohort members who may be financially aware, but have yet to begun earning significant disposable income. The sale of this product via the Internet may cause some dissention by the agent force. However, considering the high costs (time, processing, and collection) required for agents to collect premiums of $300 with commissions of a dwindling 7%, this may be a welcomed addition.[31] Agents can focus on financial advising and variable sales, while still being ‘credited’ with a portion of the sales made by Internet through a territorial indicator identified on the application (i.e. zip code). Our cohort will also provide lucrative potential to the future of Allstate.[32] Through customer inquiries, Allstate gets a glimpse into the cohort’s financial horizon and needs for additional services. These needs can be anticipated and addressed by the qualified agent force. Currently the Internet is not Allstate friendly, but as an interim offering, open solicitation of agents can be used for incentives later in the product and distribution life cycle.

Costs of establishing/enhancing the Internet site, specifically for this cohort, are minimal on the grand scale. The Internet presence of Allstate is a company initiative that will benefit all lines of insurance sold. Although, costs to be considered for this particular initiative will be easily identified when considering our target market and related website addresses. We have selected specific print media and websites based on indications of our cohort’s interests. Each banner on a website will cost approximately $20,000 for 1,000,000 views/images.[33] Other related costs will be identified through one page advertisement costs in periodicals ranging from $1,000 to $16,000 per half to full page advertisement.[34] The Internet and media marketing, although targeted to the perceived Internet savvy, will consequently be used by other segments of the market. The development costs for company marketing of all insurance lines of service has been identified at roughly $25 million. Our estimation is that these development costs can be adequately distributed between the life operations (star) and the property lines (cash cow).

FORECASTED RESULTS

Variable Annuities

Current Annuity Population (Putnam) – Putnam Annuities, sponsored by Glenbrook Life and Annuity, has been in existence for one year. This annuity offering has spurred an increase of $1.8B in managed assets. Management fees charged are exhibited on balances of $50K or less at 1.66%.[35] The average annuity contract value is $30K. Of the $1.8B under management, roughly 2% are members of our targeted cohort group.[36]

Year 1 - Anticipated income generated from managed assets of the target group is $12M. 12M * 0.0166 = $199.2K management fees generated from 400 target customers.[37]

Year 5 – Anticipated growth of annuity sales to $8.4B of managed assets. We optimistically expect growth of the cohort to sustain to 1.5% * $8.4B = $126M. $126M * 0.0166 = $2.09M in management fees generated from 3,150 target customers (average managed assets of $40K).

None of the calculations are inclusive of fees assessed for early withdrawal or change in product provisions. Any mortality charges will come from the regular premium payments made by customers. US Census Statistics reveal the mortality in this age demographic is 1 per 45,000 per year. [38]

Term Life Sales

The current number of term contracts in force is 150,000. From this population, 6% arbitrarily fit into our cohort group. The benefit of this particular product allows a win-win for both the customer and Allstate. For example, the annual premium on a $300,000 term life contract for a male, age 27, unmarried, non-smoker, is $325.[39] This amount may be paid in monthly, quarterly, bi-annual, annual or in full installments. Once again, vital statistics estimate roughly 1 death per 45,000 in this age demographic resulting in one claim. Term life offers short-term “piece-of-mind” assurance as well as a highly profitable segment for Allstate.

Year 1 - 150,000 * 6% = 9,000. 9,000 * 325.00 = $2.9M. In this example mortality tables indicate, we anticipate an annual claim payment of $300,000 (1 * $300,000). Commissions are conservatively set at 30% of 1st year premium ($870,000). The anticipated gross income, barring an unforeseen devastating catastrophe on this cohort is $1.7M.

Year 5 - 225,000 * 8% = 18,000. 18,000 * 325.00 = $5.85M. Mortality tables change for this age group at the end of a five-year segment, but the anticipated claim payments are still $300,000. Commission rates would be decreased by the utilization of a fully functional Internet, and would disperse to roughly 7% ($409,500). Anticipated gross income by doubling this cohort is then $5.14M.

CONCLUSION

Life insurance and annuities are designed to provide a service to the consumer. By targeting the cohort, Allstate has the opportunity to invest funds and collect management fees from annuity products. Emphasis should be placed on the long-term benefits of this product in order to attract this investment conscious population. With the low mortality rate, there is great potential to collect substantial investment income from invested contract premium amounts. The effective use of both the agent and Internet channels of distribution ultimately will support the uniqueness of these product offerings. The strategic utilization of the highly talented and customer empathetic agent force will further propel Allstate and its products to the forefront of the industry.

As a result of the aforementioned analysis, we anticipate this cohort would be a highly profitable group for Allstate’s life insurance and annuity products. With deregulation and a highly competitive industry, this cohort represents future cash flows and security for Allstate. Contacting and serving this group first, and properly, can have impacts on Allstate to push it as a market leader in the life insurance and variable annuity arena. The cohort has a negligible claim potential, and provides expected business prospects for the future. Properly designed marketing strategies, dependable resources and various routes of distribution should provide the advantages necessary to penetrate this relatively untapped market.

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Responsive Database Services, US Top Five TV Networks.., rdsweb1.texis/rds/suite, Date of Search 6/27/00.

St. Jean, Heidi. “Life Insurance Basics,” , June 27, 2000.

SRDS Interactive Advertising Source, , Access granted by Draft Worldwide, Date of Search 6/28/00.

Standard and Poor’s Industry Surveys, January 1, 2000

Stucker, Hal. “Gen-Xers: A Tougher Sell Than Aging Baby Boomers,” National Underwriter, v10: pp.7,14.

Sullivan, Brian. “The Road Ahead: Allstate’s Agents and Multi-Access Strategy,” Contact Magazine, 1st Quarter 2000, Accessed from Allstate Intranet, 6/27/00.

“Sybase jointly develops e-commerce/data management software for life insurance industry”, Insurance Accounting, v 11(13):4, March 27, 2000.

“Web Activities of Life Firm’s Faulted,” Insurance Accounting, 11 (9):6, February 28, 2000.

West, Diane. “Insureres are starting to pick up Generation X,” National Underwriter, v9 (1999): pp.7,29.

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[1] Hal Stucker, “Gen-Xers: A Tougher Sell Than Aging Baby Boomers,” National Underwriter, v10: pp.7,14

[2] Heidi St. Jean, “Life Insurance Basics,” , June 27, 2000.

[3] “How the Stock Market Affects Annuities: The High Price of Fleeing a Variable Annuity,” , June 27, 2000.

[4] Joe Frey “Allstate Launches click-and-mortar plan,” auto/allstateinternet500.html, Date of Search 6/27/00, pg. 1.

[5] Joe Frey “Hidden Rivers of Incentives: How Agent Commissions Affect Your Insurance Shopping,, Pressure to Sell Life Insurance can Lead to Conflict of Interest,” gen/agentcommissions2.html, Date of Search 6/27/00, pg. 3.

[6] Joe Frey “Can Agents Serve Two Masters: commissions and policyholders,” gen/agentcommissions3.html, Date of Search 6/27/00, pg. 3.

[7] InsWeb Term Life Quotes, secure1.cgi-bin/termlife.exe, Date of Search: 6/27/00.

8 Computation: Given Allstate Quote less 10%.

[8] InsWeb Term Life Quotes, secure1.cgi-bin/termlife.exe, Date of Search: 6/27/00

[9] Computation: Given Allstate Quote less 10%.

[10] Brian Sullivan “The Road Ahead: Allstate’s Agents and Multi-Access Strategy,’ Contact Magazine, 1st Quarter 2000, pg. 2 , Accessed from Allstate Intranet, 6/27/00, pg. 2

[11] Phillip Kotler Marketing Management, The Millennium Edition, Prentice Hall, 2000. Chapter 18, Pg. 555-556.

13SRDS Interactive Advertising Source, , Access granted by Draft Worldwide, Date of Search 6/28/00.

14Sullivan, pg.2

[12] “Web Activities of Life Firm’s Faulted”, Insurance Accounting, 11 (9):6, February 28, 2000.

[13] “Internet will have Widespread Impact on Insurance,” Business Insurance, 34:24H, April 17, 2000.

[14] Marilyn Ostermiller “Talkin’ About Generation X”, Best’s Review (Life/Health), v 97n10, pp 31 – 33.

[15] “Life Insurance From the Cradle”, Business Week, October 14, 1991, p. 124.

19 John J. Kollar “Electronic Commerce Will Be Crucial,” National Underwriter (Life/Health/Financial Services), v 102n20, p S8 – S9+, May 18, 1998.

20 “EDS SOLCORP introduces SOLCORP/INGENIUM 6.0”, National Underwriter Life and Health, v 104(3):20, January 17, 2000.

21 Kollar, p s8-s9.

[16] Alice Morrison; Craig Kaster “A MarketSpace of One’s Own,” Best’s Review (Life/Health), v98n6, October 1997.

[17] “Sybase jointly develops e-commerce/data management software for life insurance industry”, Insurance Accounting, v 11(13):4, March 27, 2000

[18] Morrison & Kaster

[19] Chuck Jones and Kimberly Lankford, “The untapped Xers,” Life Association News, v90n10 Oct 1995: pp.50-64.

[20]Diane West, “Insureres are starting to pick up Generation X,” National Underwriter, v9 (1999): pp.7,29.

[21]Hal Stucker “Gen-Xers: A tougher sell than aging baby boomers”, National Underwriter, v1 (2000): pp.7,14.

[22] Michelle Katz, “UnXpected”, Life Association News, v94n3 Mar 1999: pp74-77.

[23] Marilyn Ostermiller, “Talkin’ about Generation X”, Best’s Review, v97n10 Feb 1997: pp31-33.

[24]The Allstate Corporation 1999 Annual Report, pp3.

[25] Joe Frey, “Hidden rivers of incentives: how agent commission affect your insurance shopping” gen/agentcommissions2.html, Date of search 06/27/00, p.3.

[26] Maria V. Dynia, “Generation X -- a market in its prime”, LIMRA’s MarketFacts, v17n1, Jan/Feb 1998: pp.21-23.

[27] SRDS Interactive Advertising Source Online at , access granted by Draft Worldwide on 06/28/00.

[28] Ibid.

[29] Glenbrook Life Mulit Manager Variable Account Offered by Glenbrook Life and Annuity Company, Prospectus May 1, 1998, Individual & Group Flexible Premium Deferred Variable Annuity Contract, p.7.

[30] Computation: Population of cohort group calculated against statistics for Allstates current inforce policy owners.

[31] Computation: Population of cohort group calculated against statistics for Allstates current inforce policy owners.

38Robert N. Anderson, Ph.D, “United States Life Tables, 1997”, National Vital Statistic Reports, Dec. 13,1999: Table 1.

[32] Allstate quote less than 10% and average premium fees anticipated to cost $11 per $1,000 contract.

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