Property and casualty insurer Allstate is expanding into the consumer warranty business with a $1.4 billion deal to acquire SquareTrade, which provides protection plans for electronics through major retailers.
SquareTrade’s polices cover smartphones, laptops, tablets, televisions, home appliances, cameras and other devices. It claims that 57% of Americans report accidentally damaging electronic devices and spend $334 on average for repairs or replacements.
Allstate will buy the company from a group of private-equity owners led by Bain Capital. It is Allstate’s first major strategic deal since the $1 billion purchase of online auto insurer Esurance in 2011.
“Allstate’s consumer-focused strategy of providing unique products will be further enhanced with the acquisition of SquareTrade,” Allstate CEO Tom Wilson said in a news release.
He noted that SquareTrade’s revenue has quadrupled over the past five years and it has built “strong relationships” with major retailers including Amazon, Costco, Sam’s Club, Target, Staples, Office Depot and Toys “R” Us.
Allstate is the nation’s largest publicly held personal lines insurer, with auto, home and life policies that cover 16 million households through its Allstate, Esurance, Encompass, and Answer Financial brand names.
According to Insurance Journal, the acquisition of SquareTrade “is the latest turn for Allstate in its drive to serve the new economy and connected consumers.” It has also established a telematics unit to collect data on drivers and sell analytic products to third parties and become the first major insurer to offer personal property protection for home-sharing hosts.
SquareTrade was founded in 1999 as a website that mediated disputes between eBay buyers and sellers. Its protection plan for a new iPhone costs $89 for one-year and $179 for three years.
The Wall Street Journal said the company “has been a disruptive force in the sector because of its online sales model, pricing and the information it provides about failure rates of products.”
“With Allstate, we will gain a broad set of capabilities enabling us to further leverage our distribution, brand and team, while retaining our entrepreneurial spirit,” SquareTrade CEO Ahmed Khaishgi said.