Allstate to Launch Online Sales
                   Of Auto and Home Insurance

                   By DEBORAH LOHSE
                   Staff Reporter of THE WALL STREET JOURNAL

                   You can be in good virtual hands, too, Allstate Corp. is betting.

                   In a strategic shift that will cost more than $1 billion over two years, the big
                   insurer plans to begin selling car and home insurance directly to consumers
                   through the Internet and over the telephone. It is a revolutionary move for a
                   company with a huge, nationwide fleet of sales agents. And it is the latest
                   example of a traditional, "bricks-and-mortar" company being pulled on to
                   the Web.

                   Allstate will finance its ambitious Web and phone strategy partly by cutting
                   costs. The company will eliminate 10% of its nonagent work force, slashing
                   4,000 positions, for annual savings of $600 million.

                   "It's a very competitive marketplace out there right now," Allstate
                   Chairman and Chief Executive Edward Liddy said in an interview. The
                   industry leaders nowadays are those that have "the lowest cost structure,"
                   he said.

                   Radical Departure

                   The direct-sales initiative represents a stark departure for a company that
                   traditionally focused mainly on reaching customers through a huge fleet of
                   agents who generate sales for Allstate. "It's a bold move" for the company,
                   said Jay Cohen, a property-casualty analyst with Merrill Lynch & Co.
                   "They are totally changing the model" for property-casualty insurers.
 
 

                                       A Changing State

                   Allstate responds to Web challenge

                   Initiatives

                        Spend about $1 billion over
                        two years to launch an
                        Internet and phone sales
                        channel.

                        Cut 10% of its non-agent
                        workforce, or 4,000
                        positions, to save $600
                        million.

                        Convert 6,500 employee
                        agents to independent
                        contractors.

                        Buy back $3 billion in additional shares.

                   Sources: The company; Tradeline
 
 

                   Still, Allstate isn't going to cut agents completely out of the picture. Any
                   customer reaching Allstate via the phone or the Internet will be assigned an
                   Allstate agent, who will get a 2% to 3.5% commission on any product that
                   customer buys through that channel; that compares with the 10%
                   commission an agent earns for business he generated.

                   Allstate plans to begin offering phone and Internet sales gradually, starting
                   with customers in Oregon in the spring, expanding to 16 states over the
                   next year and nationwide by 2001. It plans to market Internet-sold
                   products using the Allstate name. In the past, the company used newly
                   created brand names when trying new forms of distribution.

                   Response to Rivals

                   The move, reflecting the giant insurer's struggle to stay competitive, is an
                   effort to grab some of the success that nimble rivals such as Progressive
                   Corp. and Geico, part of Berkshire Hathaway, have enjoyed as they target
                   customers directly, bypassing costly agents. When such direct-sales
                   operations are up and running with critical mass, they can result in
                   lower-cost insurance. Progressive and Geico have posted double-digit
                   premium growth, while premium growth in Allstate's core business has
                   been anemic.

                   Every company is waking up to the realization that they must have "multiple
                   access points to the customer," said Larry Mayewski, an analyst with
                   A.M. Best Co.

                   Allstate said it will plow virtually all of the $600 million it expects to save
                   from the job eliminations into the new sales channel, rather than trying to
                   reduce overall expense levels. "The way to grow your profits over time is
                   to put more on your top line," said Mr. Liddy, echoing the mantra of
                   Internet executives and analysts alike.

                   Indeed, the early investment needed to rev up a direct-sales operation can
                   initially make it a far costlier form of distribution than using agents.
                   Companies have to spend millions on technology systems and marketing to
                   let customers know about the new channel.

                   The job cuts, which Allstate said would come from a combination of
                   layoffs, attrition and redeployments, will span its entire work force, not
                   including agents, and will include eliminating 460 jobs from its Northbrook,
                   Ill., headquarters. Included in the total will be about 20 corporate officer
                   positions, as well as up to 200 jobs that will be lost as part of a previously
                   announced closing of four field offices.

                   Savings from the restructuring could add around three cents a share to
                   Allstate's earnings next year, the company estimated, and possibly 36 cents
                   a share in 2001. Also in an effort to improve the per-share earnings
                   performance, Allstate said it will double its planned share-repurchase
                   program to $4 billion, $1 billion of which it has already completed.

                   Separately, in a move that is certain to alienate some agents, Allstate also
                   plans to force about 6,500 agents who are now treated as employees, with
                   various pension and other benefits, to become independent contractors
                   known as "exclusive agents."