Showing posts with label Robert E. Wood. Show all posts
Showing posts with label Robert E. Wood. Show all posts

Saturday, January 19, 2013

Allstate: It Really is All in a Name

English: An Allstate store in Moncton
 An Allstate store  (Photo credit: Wikipedia)
The Allstate Insurance Company name came from the popular Allstate brand of automobile tires that were sold through Sears, Roebuck & Co. in the 1920s. The original "Allstate" name chosen for a new Sears tire brand in 1925 came from a national contest Sears held that garnered 2 million entries. 

Why a Sears Brand Name? 

Sears was a leading general merchandise brand in the 1920s. The Amazon of its time back in the day, it sold primarily through mail-order catalogues. Formed in 1886, it didn't open a retail store until 1925. With the Allstate brand tires sold through the Sears catalogue, the Allstate brand name became popular quicker than it would have otherwise. Cars, tires, and the Allstate name evolved into a natural fit for the name of the next Sears auto line, car insurance. 

During the 1920s, auto manufacturing and associated maintenance businesses like gas, oil, and tires became the most important economic sector in the United States. Automobiles were more important than the previous economic leading industry, steel. At least they were, up until the October 1929 stock market crash that caused the "Great Depression" of the 1930s. 

Before the crash, 1929 was a record-setting year for car sales of more than 5 million. After the stock market crash, auto sales dropped to 3 million sold in 1930. American automobile sales continued to decline in 1931 and 1932 to less than 1.5 million. 

Allstate Insurance Company Opens for Business through Sears 

Yet, the Allstate Insurance Company formed during the Great Depression despite the decline of automobile sales. In 1930, insurance broker Carl L. Odell proposed the idea to sell car insurance by direct mail through the Sears catalogue while playing bridge during a commuter train ride with his neighbor, General Robert E. Wood, the Sears President and CEO. 

Odell's idea to sell auto insurance through the Sears catalogue was based on cutting insurance costs by eliminating sales commissions. General Wood saw an excellent opportunity for cheaper car insurance as a much-needed service during the "Great Depression." Although car sales declined, American's reliance on cars was increasing. Wood persuaded the Sears Board of Directors to approve financing for the Allstate Insurance Company with $700,000. 

Selling only car insurance through the Sears catalogue, Allstate officially started business in April 1931. Odell became Allstate Insurance Company's vice president and secretary. The first sale came the following month for a 12-month policy on a 1930 Studebaker that cost $41.60. By the end of the first year, Allstate sold over 4,000 policies and earned over $118K in premiums. 

Allstate Insurance Company Grows Beyond Mailorder into Sears Retail Stores 

By 1933, Allstate Insurance made its first profit, a respectable $93,000 with 22,000 policies. Odell and Wood had proved their cost cutting theory of eliminating sales commissions by direct sales through the catalogue, But in 1933, Allstate set up a booth at the Chicago World's Fair and sales boomed. 

The first Allstate Insurance sales office opened in a Chicago Sears retail store in 1934. Although the formation of Allstate Insurance was based on avoiding the extra cost of sales commissions, the savings from using existing Sears stores offset the extra commission expense in full. 

Allstate Insurance Company continued to transition from catalogue to direct sales through Sears stores during the "Great Depression" and sales increased at a slow, yet steady pace. Allstate went on to become the trend-setting industry leader in the United States auto insurance industry through the 1940s and 50s. 

The Allstate Insurance Company name demonstrated how quickly a new product can prosper by using the same name as an existing and related industry product brand. 

Dennis Gilroy has acquired extensive experience in the insurance industry. He enjoys writing for personal finance blogs. 

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