- Commission Cuts
- Commission Followup
- Series Code Explainer
- ZURICH 2015 Annual Results reports and presentations
- DOI memo-85468
- Executive Compensation
Once again UFAA seems to be on rumor patrol. It has been reported that several DMs are holding “meetings” with agents and that there are going to be commission cuts coming in the near future and that it is time to get ready. Some have said that all agents will be given a cut in commissions with a base commission set for everyone and then an increase with new business written. Now other DMs have stated that no commission cuts are on the table. What are agents to do?
We have heard
“…they will change new business from 20% to 14 and 0% on renewals for fire policy’s…”
“…NB Fire commissions are coming down. 2016: 18%, 2017: 16%, 2018: 14%. 2019 NB and renewals:10%…”
Question 1…“So Farmers just raised our Fire Insurance rates 09%, which means we are even more uncompetitive, so I will have to work twice as hard to retain the business and then my reward is to take a commission cut?”
Question 2…”NASCAR, Farmers Open, Farmers Field” – OK, that is not a question just a statement
Questions 3…”4% commission cut on renewals…what does that do to my Contract Value? Not a pretty picture.”
Like the commission cut “rumors” headed off in 2002-2003 and 2006-2007, this new commission system will place direct and heavy pressure on the smaller agents without a large number of PIF, and it works without quotas. All agents will be paid the same base commission. Work a little harder and you will be able to earn more. Should it work like this management will rid itself of the lower 20 to 30% of its agents. The smaller agents will not be able to sustain their agencies receiving only the base rates. They will be forced out of business.
in the December 5, 2014 Investor update from Zurich it is stated that Farmers… EXISTING STRENGTHS & CAPABILITIES
Strong brand – Total brand awareness in Core 29 states at 93%1
Broad product suite – Auto, Home, Renters, Umbrella, Life, Motorcycle, Boat, Business Insurance, and more
Large agency force – 2nd largest exclusive agency network in the United States
WHERE WE’RE GOING
Outstanding customer experience
Single, targeted brand
Increased share of wallet through product density
Omni channel capabilities
Upgrading quality and increasing number of agents
(to review the full report click here)
Creating an atmosphere where agents feel they are competing with their own company, being priced out of the market and are just another replaceable cog in the business model is not the way to retain agents and in turn their book of business.
It has been reported that every time an agent leaves about 50% of their Book of Business leaves makes one wonder; is Farmers being penny wise but pound foolish? If an agent has a 1,000 PIF with an average premium of $1,000 that is $1,000,000 in premium. That agent leaves and 50% of that book leaves that means Farmers is losing $500,000 in premium but gaining NOTHING by the agent leaving. Multiply those numbers by the 20% of the agents that will not be able to survive a commission cut and you lose 2,603 agents (20% 13,019 agents reported for the 2014 3rd quarter) and Farmers stands to lose $1,171,350,000 ($1,301,500,000 less 10% commission paid to agent). That loss comes by simple attrition of agents. Agents that pay their own office expenses, their own CE credits, their own staff salary, their own Business insurance and their own taxes.
In 2013, by their own admission, Farmers lost 2,800 agents and had a net loss of 1,200,000 policies. What will another round of rate increases and possible commission cuts do to Farmers existing PIF? How many agents will feel they NEED to leave the Agency Force? How many long time clients that stay because of the agent will shop because of a rate increase AND losing their agent? That 50% attrition could skyrocket.
Management seems to have figured out that if they only take this from one group of agents and that from another group of agents and something totally different from the third group of agents there will not be a MASS BLASTING from all the agents. Only the agents being affected will make noise and we all know that one squeaky wheel can be quieted (read replaced) fairly simply.
Well remember the story of the Farmer and the Mouse, what affects one member of the group affects all members. If the smaller agents fold the middle sized agents are now the smaller agents, what is to keep Farmers from going after them next year?
Now we all know that rumors are just that rumors and not fact. If we were receiving this info from one or two agents in the same district it would be hard to lend credence to it but when we hear from several agents from several different states it is hard to believe that the talk is from one or two rogue District Managers. Not much can be done until it is formally announced, if it ever is.
The question posed to you is this, what is to keep Farmers from Moving the Cheese again and again? Who is to be the watchdog for the smaller agents? Where is the collective voice of Farmers agents saying “Agents are the lifeblood of Farmers?” It’s time to stand together and tell Farmers that they cannot cut out agents that are producing and making it. It’s time for all agents to protect each other.
If you would like to be removed from ALL of UFAA’s mailing lists just respond to this email with Remove and your name in the subject line. You may also fax your request to 314-631-7963 or call the National Office at 800-275-8668.
How do your Homeowners rates compare?
The National Association of Insurance Commissioners (NAIC) released its 2012 Homeowners Insurance Report on Jan. 20, providing detailed data on market distribution and the average cost by policy form and insurance amount of homeowners insurance across the U.S. The report provides countrywide and state-specific premium and exposure information for standard noncommercial dwelling fire insurance and for homeowners insurance package policies (HO-1, HO-2, HO-3, HO-5 and HO-8), tenant policy HO-4, and condominium/cooperative unit owner’s policy HO-6.
The 2012 report, available for free download on the NAIC website, includes some interesting statistics as well as detailed charts.
To view the entire article from property casualty360.com please click the link below.
Homeowners insurance rates: How does your state compare?
SERIES CODES for all policies.
To view the Series Codes for all policies visit the UFAA website and look under “News – News About Farmers”
Recent Case Developments
As noted in prior updates, UFAA’s case against FGI and the Exchanges has been gaining steam over the past several months. UFAA has gone on the offensive, deposing several key individuals within FGI, while continuing to pursue other discovery avenues. However, the defendants are now attempting some offensive maneuvers of their own, with FGI and the Exchanges each filing motions seeking to have UFAA’s lawsuit dismissed in its entirety. UFAA will have an opportunity to respond to these motions, and a hearing will ultimately be held in March.
In short, FGI argues that because it is not listed in the Agent Appointment Agreements as a party, it cannot be held liable for any breaches of that agreement (notwithstanding our allegations that FGI has directed much, if not all, of the wrongful actions against agents).
The Exchanges’ motion sets forth separate arguments. First, they claim that UFAA should not be permitted to pursue this action on behalf of its members because of the sheer number of individual agents who have suffered harm from the defendants’ conduct; thus, they assert that each member should be required to pursue the case individually. This is a favorite argument of FGI, because they know that it would not be practical for each and every member agent to individually sue the defendants. It is, of course, ironic that the defendants’ own wrongful actions that have created the need for such widespread relief.
The Exchanges also take issue with the substance of all four of UFAA’s claims. Notwithstanding various documents provided by UFAA to evidence the defendants’ wrongful actions, the Exchanges maintain that UFAA still has not introduced enough evidence to proceed to trial. In addition, they employ a series of very technical arguments – possibly, in hopes of “muddying the waters” and taking the attention off the real issues in this case.
UFAA is prepared for this challenge and will continue to fight for the rights of its member agents. Additional updates will be provided in the coming weeks and months.
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