Exclusivefocus Spring 2013 - National Association of Professional ...

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opinion From Intangible Product to Intangible Company By Brian Spillman Allstate Agents used to sell an intangible product. We all understood that fact and accepted it, even though it was harder to sell than say, a household appliance that people could see and touch. But these days, Allstate agents are selling an intangible company. Not long ago, agents were proud to be a part of Allstate. It was a great brand name with very competitive products. The company’s employees would go out of their way to help an agent if a customer was involved. In fact, one of the company’s favorite catchphrases was “Nothing happens until a sale is made.” This meant that every employee in the company basically owed their job to the agents who sold Allstate’s intangible products. Back then, the company did all it could to support agents, and there was mutual respect and appreciation for each party’s role within this great company. I’m not sure exactly when the respect and appreciation part began to erode, but the products started to erode when the infamous Tropical Cyclone Deductible (TCD) was introduced in coastal areas. This immediately put Allstate agents at a disadvantage with their competitors because we were the only major player with the requirement. Although some companies followed suit with their own hurricane deductible, they are nowhere near as severe as ours. Thus began the company’s profiteering: to the detriment of the consumer and at the expense of agent integrity. I remember feeling pangs of guilt whenever somebody switched their homeowner policy from State Farm to Allstate. While I was careful to explain Allstate’s TCD, I’m sure there was a great deal of misunderstanding and indifference on “ Changing such an ingrained, authoritarian culture would take a Herculean effort and require sea change in the attitudes of those at the top. “ the part of the insured at the point of sale – after all, what were the chances of an East Coast hurricane making landfall anywhere but Florida or the Carolinas Then came the outsourcing. The company put its toe in the water with commercial, a product line in which Allstate was never a big player. More than a decade ago, Allstate figured out that it would never really be any good at commercial, so they decided to let agents write the risks they didn’t want through certain brokers, such as Northeast Agencies. Allstate agents from the 60s and 70s used to say that the only things Allstate wanted to insure were “riskless risks.” In recent years, they took this philosophy a step further when they started allowing agents to broker commercial. Essentially, the company gets money for doing nothing. You see, this was when the company began to shift its focus from supporting agents to preying on them. We all know that agents earn a measly 8% commission on these brokered commercial policies. When independent agents write the same policy through the same carrier, they earn between 12 and 20 percent. So, if you’re an Allstate agent you might wonder, “What happens to the commission in excess of 8% Why, Allstate pockets it, of course. If you think about it, they have no claims to pay or advertising expense, so it is pure profit – earned on the backs of agents, who are struggling to eke out a living. Then, instead of looking for brokers with great products for agents to sell, the company’s focus always seems to be on brokers who are profitable for the company – not the agency force. Once commercial brokering took hold and the company saw how easy it was to make money without risk, they created many other Expanded Market opportunities, especially in coastal states. These included Couch Braunsdorf to broker home insurance in “no write” zones, and a slew of other commercial brokers like Butwin, Northwest Agencies, etc. I would be remiss if I failed to mention Florida, the mother of all property brokerage states. The ability of Florida Allstate agents to broker property policies was born after Hurricane Andrew devastated many parts of the state in 1992. Allstate was overexposed and has been trimming back its market share there ever since. Next, the company started outsourcing claims and all internal support functions’ such as tech support, customer service, billing support, etc. This is when the mutual respect part started to disappear. Before then, when agents tried to resolve customer problems, they always had adequate help. All of a sudden, agents found themselves wasting hours on the phone trying to decipher 42 — Exclusivefocus Spring 2013
complicated concepts through the filter of a foreign accent. As an agent, it was at this point when I felt like the gloves were off – the company no longer cared about its agents or customers. While the company was making money off of brokering partnerships, they were also peddling marketing programs such as Business Builders and TAG, at healthy profit margins. Even the Allstate logo paper is expensive – so much so that it wouldn’t surprise me if they were profiting from it and other branded office supplies. As you can see, the focus has clearly shifted from wanting a professional, knowledgeable, sales force to wanting a captive group to which it can hawk its wares for a profit. In days of yore they would have called this “The Company Store.” Woople is an example of what happens when the company’s plan to make money off of the agency force fails. Someone in the company purchased the Woople marketing program and was convinced it would make money for the company when agencies purchased it individually. When very few agencies purchased it, the company tried to salvage their investment and offered it for free, but there still weren’t many takers. So the gloves came off, and the company forced the agency force to use Woople against their will. When it came time to renew the contract, the company finally saw the futility of its folly and ended its relationship with Woople. Good riddance to bad rubbish! That’s the kind of climate the agents continue to face in their relationship with the company. Will it or can it change Possibly, but changing such an ingrained, authoritarian culture would take a Herculean effort and require sea change in the attitudes of those at the top. And based on my past experiences, our beloved CEO is just not willing or able to be that kind of guy. A side note here is that agents are being told that if they don’t sign up and pay for an Allstate-sponsored “marketing package,” they won’t be eligible to participate in any future marketing programs for the rest of the year. But when an agent in my area wrote and asked what those future marketing plans were so he could plan his year-long marketing efforts, the company failed to respond. It sounds like they really don’t know what their plans are from day to day. It also sounds like a high-pressure sales job to me, so I can only assume the company is putting pressure on local employees to sell this stuff to the agency force. There’s even a rumor that the company will start offering lines of credit to agents at an adjustable interest rate. Once again, they want even less risk than a bank does! By offering an adjustable rate rather than a fixed rate, they’ll make more money as interest rates rise. Something tells me this will fail the way Woople did. Agents just aren’t that stupid. The upshot of the changes I have described is that Allstate agents are selling many other brands under the Allstate umbrella and many functions associated with an insurance company are being outsourced. Thankfully, the Claims Department hasn’t been outsourced to a foreign country, but I throw it into the same category because of the CAT teams. Have you noticed that any time the wind blows it’s now labeled a “catastrophe” That saves the company lots of money. Not only do they have fewer people in the claims department, but it helps when it’s time to report “normalized” losses by backing out the CAT losses. Sure, customers aren’t served as well when people from other states have to interpret our policies to pay a claim – but this is no longer about serving customers. My only conclusion is that Allstate wants to be anything BUT an insurance company. They don’t want to price it, underwrite it, service it, or handle claims. They don’t want any risk at all, and they don’t value the quality of their sales force. They just want scads of profit. Of course, as business people, we all love profit. In addition, we aren’t naïve enough to think the company is in business for charity. All I am suggesting here is that Allstate earn its profits by going back to its roots – the insurance business. Ef Join the “ALL Agents Page” on Facebook All New Group for Allstate Agents and Former Allstate Agents Only https://www.facebook.com/groups/304988616263352/ Click JOIN once you’re a member, the link will be under Groups on your Facebook page. Spring 2013 Exclusivefocus — 43
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