Depot in good hands with Allstate - Brief Article

Elizabeth Consavage

Property damage claims to be based on retailer's pricing

ATLANTA -- Home Depot could see as much as $40 million in added sales of floor coverings and installation services this year through an alliance with Allstate Insurance Co.

The Northbrook, Ill.-based insurance company is now referring its homeowner-insurance policyholders with property damage claims to the home improvement giant for products and services.

The agreement currently applies to flooring replacement - the most common property damage claim -- with Home Depot supplying materials and installation. Allstate is also using Home Depot's pricing of building materials as a base for payment of property damage claims. Adjusters will work with Depot's 892 U.S. stores, all of which offer installation of carpeting, tile and other floor covering.

"It fits very well with our at-home services strategy," said Daniel Hoppes, director of national insurance programs for Home Depot. "We can supply both labor and materials for a piece of business that we have never gotten before."

Other products and services will be added to the program in the future. With a goal of boosting installation sales by 40 percent a year, Depot generated about $1.5 billion last year through sales of installed products including water heaters, roofing and garage door openers.

Policyholders do not have to use Depot products or services but will pay the difference if they opt for more expensive materials or installation. Conversely, if homeowners can find cheaper products, Home Depot will be asked to match them or Allstate will pay claims at the Depot price guide.

"We checked a lot of companies, and Home Depot came out better than everyone else," said Doug Raucy, the Allstate senior manager overseeing the Home Depot partnership. "They're nationwide, just like us. It was a natural fit. Home Depot stood out above the rest."

The partnership, engineered by Allstate, was forged in January but was disclosed in late May after several months of success, Raucy said. Allstate had a similar flooring program when it was affiliated with Sears but none so comprehensive as the Home Depot agreement, Raucy said. Allstate would consider a similar alliance with other home improvement centers and Home Depot is open to agreements with other insurance companies in the future, company spokespeople said.

"We wanted to get comfortable with it," Raucy said. "We started to see some success with it, so we decided to go public. It's working well and we hope it will continue to work well."

Allstate this year expects to pay about $100 million alone to homeowners to cover claims for damaged carpeting alone, Raucy said, and Home Depot could wind up capturing between 30 and 40 percent of that. Hoppes could not give an exact figure for Depot's flooring sales since the program began.

Allstate, which has about 15,000 agents and provides insurance for more than 14 million households, expects to save between $30 million and $50 million annually in claims costs by reimbursing customers for repairs based mostly on Home Depot pricing. But agents will inform policyholders about this only after they file a claim, which about 20 percent do annually.

The new program is part of Allstate's marketing effort to reduce expenses and remain competitive, Raucy said, but it is not expected to reduce policy rates. Allstate pays out about $1.8 billion to $2 billion a year in property claims and another $1 billion a year for catastrophic losses.

Home Depot has not increased staffing or marketing efforts as part of the new program and does not expect to expand the alliance by offering Allstate insurance to its customers from its stores.

"While the business is a significant amount, it's spread out over all our stores so it doesn't affect any one store," Hoppes said. "These are all incremental sales."

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