Allstate is eliminating about 8 percent of its workforce.
The Northbrook-based insurance giant announced today that its restructuring will affect about 3,800 employees, mainly in “claims, sales, service and support functions.” The cuts come as the insurer is closing regional offices around the country and consolidating their work in three larger offices, including the Northbrook headquarters.
A spokesman didn’t immediately respond to how many of the affected workers are in the Chicago area, although some are, company sources said.
Allstate has been doing some of the cutting throughout the summer, but a large number of employees were informed of their status just last week, sources said.
Allstate said the cost-cutting was necessary as price competition heats up in auto insurance. “Improving customer value includes improving the competitive price position of auto insurance, which requires cost reductions to maintain margins,” the company said in a press release.
Archrival State Farm, based in Bloomington, has reduced auto rates by double digits nationwide over the summer, and Mayfield Village, Ohio-based Progressive also has cut prices significantly in select markets. State Farm is the largest U.S. auto insurer, while Progressive is No. 3. Allstate, the fourth largest, provided temporary rate relief to policyholders in the early months following the onset of COVID-19 but has refrained thus far from longer-term rate cutting.
Allstate didn’t disclose how much the cost-cutting actions will save. It will incur $290 million in one-time restructuring charges, mainly for severance and extended benefits for affected employees. There will be an additional $80 million in costs tied to the closure of offices. The charges will hit earnings mainly in 2020, with a small portion affecting 2021 results.
“Implementing this plan is difficult as we still deal with the impact of the pandemic but necessary to provide customers the best value,” Allstate CEO Tom Wilson said in the release. “We have expanded transition support for impacted employees including prioritized internal hiring, extended medical coverage, expanded retraining support and help in employment searches.”