Exclusivefocus Summer 2012.pdf - National Association of ...

to embarrassingly high. In past years, Imaintained a great retention ratio andhave company plaques on my office wallsto prove it. But for the past year or so I’vebeen bleeding policies at an unprecedentedand alarming rate due to massive rateincreases over the past three years.IncentivesAllstate doesn’t seem to understandhow incentives work. They also don’tseem to get that if you partner with someone,both parties must have equivalentincentives and mutual goals. What is myincentive to spend money advertising forEmerging Business products, like renters,when I have to spend more than I’ll make?Sure, the recognition for writing the businessis fine, but it doesn’t pay the bills. ButAllstate’s ulterior motive is not for us tomake money selling these policies; insteadit would appear they are engaging in adeceptive ploy to dupe shareholders intobelieving that they are increasing theirPIF in a meaningful manner. But as weall know, auto is meaningful PIF, EB isnot – and they cannot seem to grow theauto side of the business.Apparently, Allstate believes that bythreatening agents with the consequencesof missing their Expected Results – possiblyresulting in the termination of theircontracts – is a good way to force themto spend money advertising for EB productsthat do little to build solid books ofquality business. For smaller agencieslike mine, cash flow is everything. I simplycan’t afford to waste a ton of time ormoney chasing renters policies that havean annual premium of $150 or less whenI could spending the same amount targetingmore stable products with higherpremiums, such as home and auto. Thenthere is the service aspect. I get paid thesame for 10 renters’ policies as I do forone $1,500 homeowner policy. I have todo 10 times the work to write the businessand then next year when half of themmove and the other half don’t renew, myretention drops and I have to make fiveaddress changes. Allstate seems to forgetthat agents are paid on premium volumeand not policy count.Sure, I could get a “bonus” if I sell a lotof renters policies and hit my other expectedresult categories, but that is onlyif I hit all the other nonsense goals Allstatesets. If I miss just one goal – in onecategory, by one policy or by one dollar –I might as well not do any work towardsany of the goals. Again it’s about incentives.If I have to hit $20,000 in AFSproduction to receive a bonus or to keepfrom being considered a “bad agent,”does it really matter if I produce $1,900or $19,000? I still get nothing and mybusiness is on the line, even though thereis a large gap between those two productionnumbers.My strategy has always been to investin advertising that generates a positiveand quick return on my investment.If I cannot produce a constant positivecash flow, I can’t operate my agency. Allstate’sgoal has been to force me to advertisefor them, to sell products to makethem money, at my expense. I believethis is also why Allstate is now requiringsuch large cash reserves of its newagents. The more reserves an agent has,the more they can advertise for Allstate.Of course, agents hope their ‘investment’will someday turn a profit. In mostpartnerships, the principles have mutuallybeneficial incentives to make theirarrangement work. Perhaps, this is whyso many of Allstate’s partnerships havefailed. Agents put up $25,000, $50,000and now $75,000 of their own moneyand spend years building their agenciesonly to be kicked out the door virtuallypenniless while Allstate reaps the fruitsof their labor.Financial ServicesI would love to do more with financialproducts. I thought this was a great opportunitywhen I came on board and Istill think so. However, I ran into someserious issues here.In the past few years, I have foundmyself spending an inordinate amountof time trying to justify and explain theongoing series of rate increases we’ve hadin my state. Every rate increase damagesmy credibility, especially if my customershops around and finds out they can findbetter coverage (earthquake included)for half the price. This raises doubtsabout me in their minds and makes mecome across as a shady used car salesmaninstead of a trusted financial expert. Asa result, it is hard to convince them tospend more money on AFS products.Furthermore, due to the fact that Ispend 60 to70 hours a week workingon my P&C business. It consumes mytime and limits the amount of time I amable to invest in educating myself to thepoint where I feel comfortable managingpeople’s investment and retirementfunds. Though I am licensed in variableproducts, I do not feel that I havethe skill set to do my customers justice.Allstate knew I did not have a financialbackground going into this business, butthey were unconcerned and promisedthey would provide with the educationand people to partner with.I might be in the minority here, butI wouldn’t want a financial advisor withlimited investment knowledge managingmy retirement funds, especially if Iknew he was only doing it to save his job.Maybe this is just me, but I like to treatmy customers the way I would want tobe treated and for me to try to convincethem to buy their retirement funds fromme –when I don’t fully understand whatI am selling – would be unethical.At least in my area, the EA/EFS partnershipsimply hasn’t worked effectively.Allstate can’t seem to hire or retain EFSsin our area, even with a $5,000+ referralincentive. I understand this is true inother parts of the country too. The fewEFSs I have worked with have causedmore lost business than they have gainedand added more frustrations than I need.Back to incentivesThis brings me back to incentives. Aswe know, Allstate has structured its financialrequirements in such a way that ifyou do not hit a minimal amount of production,you get wacked on everything.On top to that, the targets are constantlymoving and many times year-end goalsaren’t announced until late in the firstquarter – and sometimes even later. As asmall agency that relied on the cash flowfrom the P&C side, I did not have thetime or resources to hit my minimum financialproduction amount. Because therequired amount was so large and my resourceswere so limited, I had to make abusiness decision and I chose to focus onP&C in order to maintain my cash flow.Summer 2012 Exclusivefocus — 49