featureWill Your AgencySink or Swim?New Opportunitiesfor <strong>Allstate</strong> AgenciesBY JIM FISH, EXECUTIVE DIRECTORIn many parts <strong>of</strong> the country, <strong>Allstate</strong>agents are facing mighty big problems.Shrinking markets, soaring E&O premiums,uncompetitive pricing, increasingagent technology expenses and Northbrook’sunflinching resolve to stay out <strong>of</strong> theprice cutting game are causing some agentsto rethink their future as agency owners.In this age <strong>of</strong> sliced and diced pricingtiers for auto and property insurance,it has become increasingly more difficultfor agents to identify specific market segmentswhere <strong>Allstate</strong> has a price advantage.The problem is that nobody can accuratelypredict who will qualify for thebest tier until the PQB information isavailable. Many agents have resorted tobuying pre-qualified leads, such as Internetleads, hoping it will help zero in on that“sweet spot” where the <strong>Allstate</strong> product ismost competitive. While these leads haveproven to be pretty good, there are somedisadvantages. First, the leads are usuallyshared with agents from other companiesand, as most agents have discovered, most<strong>of</strong> the choice zip codes are already takenby other <strong>Allstate</strong> agents. Recognizing thepotential <strong>of</strong> Internet leads early on, some<strong>Allstate</strong> agents have essentially corneredthe market in their state by buying upall available Zip codes from the top tierInternet lead companies like NetQuote.Agents who work Internet leads claimthat the agent who contacts the prospectfirst has the best chance to write the business.For <strong>Allstate</strong> agents, this is especiallytrue. As the first contact, you can extol themerits <strong>of</strong> YCA and the <strong>Allstate</strong> brand. Ifthe competition calls first, you could have12 — Exclusivefocus <strong>Fall</strong> 2007
problems because, chances are, your ratewon’t be the lowest.Most agents understand that valueselling only goes so far. How much overthe competition is the <strong>Allstate</strong> brandworth? $100, $250, $500? The answerdepends on the perception <strong>of</strong> your customer.While many prospects are interestedonly in price, there are definitelysome who are willing to pay more to g<strong>of</strong>irst class. These are the folks who wanthonest answers, fair treatment, dependableservice and minimal hassles. Whenyou do luck out and come across desirableprospects like this, the sale is notnecessarily a slam dunk because there areother factors that can influence the buyingdecision. One <strong>of</strong> these factors is theconsumer’s perception <strong>of</strong> <strong>Allstate</strong> andthe insurance industry as a whole. As anexample, more than two years after thefact, consumers are still being bombardedwith news stories about Katrina. And,as you know from reading these stories,they are rarely kind to our industry.Thankfully for us, it has been State Farmthat has taken most <strong>of</strong> the heat.<strong>Allstate</strong> agents are now faced witheven more hurdles as they pursue newcustomers. Selling brand value will becomeever more difficult as other majorinsurers, such as Geico, State Farm andAIG aggressively cut prices to lure yourcustomers away. This trend will be furtherexacerbated by <strong>Allstate</strong>’s stance oncutting rates. According to CEO TomWilson, <strong>Allstate</strong> is not about to participatein any price wars. In July he warnedthat the future could be “bumpier on newbusiness, but it will also be more stableon the long term.” Not joining the ratecutting party is a strategy certain to leadto a loss <strong>of</strong> new and renewal income for<strong>Allstate</strong> agents, many <strong>of</strong> whom have alreadylost their <strong>Allstate</strong> property markets.In addition, these same agents willsoon have increased technology expensesand some will lose their <strong>Allstate</strong> grouphealth insurance. For the agents trappedin this situation, one has to ask “howmuch more can they take?”It is clear that <strong>Allstate</strong> is undergoingtremendous changes. It is a corporate entitythat must make changes in order tosuccessfully compete amid intense competition.Many <strong>of</strong> <strong>Allstate</strong>’s decisions willaffect the way you do business and howyou run your agency. As we move forward,it is clear that the umbilical cord <strong>of</strong>company support is being severed. In thefuture, only top performing agencies willreceive bonuses or subsidies. <strong>Allstate</strong> willprovide products for you to sell, but beyondthat you’ll be totally on your own.That is the essence <strong>of</strong> the new reality inyour relationship with <strong>Allstate</strong>. You willbe expected to find your own way in thisworld. Thankfully, your association, asyou will see throughout this magazine, isdedicated to finding ways to help agenciesthrough rough times.Selling in uncompetitive markets isnot easy, but not impossible. Unless ratesin a market are consistently much higherthan the competition, most establishedagencies can live through a few years <strong>of</strong>higher than average premiums. Smalleragencies have a more difficult time stayingafloat. Newer scratch agents areparticularly at risk. Many <strong>of</strong> them comeaboard with inflated expectations and areeasily discouraged by a lack <strong>of</strong> results.Then, desperation sets in as they seetheir life savings dwindle down to nothingand they have little to show for it.Some MDLs, in their zeal to hire moreagents, unwittingly set these agents upfor failure by allowing them to start anagency significantly undercapitalized.When you are in an uncompetitivemarket, the best approach to writing newbusiness and maintaining existing businessis to manage both sides proactively.On the renewal side, consider overhaulingyour customer contact program byfocusing on important policy features,the value your agency adds and, <strong>of</strong> course,the ease <strong>of</strong> doing business with <strong>Allstate</strong>.Many customers will truly appreciate youcaring enough to contact them. It maystop them from shopping when they receivetheir renewal bill. And, even if theydo, they will think twice about switchingto an agent unknown to them and whosecustomer service is untested.On the new business side, concentrateon learning all you can about the productsyou sell. What features are uniqueto your products and how are they betterthan the competition’s? This strategy is atough sell for prospects looking for thelowest price. Where it is most effectiveis with those consumers who appreciatedealing with a knowledgeable pr<strong>of</strong>essional.They want an agent that really knowswhat he’s doing. Your Choice Auto is anexample <strong>of</strong> a product that lends itself toselling policy features and options. Yoursuccess, however, will still largely dependon the rates in your area. If your priceis excessively and consistently high, youmight want to consider shifting your focusto your renewal book in order to preserveas many accounts as possible.Developing and perfecting a YCAsales presentation touting the virtues <strong>of</strong>the product is not something every agentfeels comfortable doing. Let’s face it, inorder to sell the benefits <strong>of</strong> YCA, lifeinsurance or anything else, you have tobelieve in the product itself. If you don’tbelieve in what you’re selling, your prospectsand customers can usually sense it.With YCA, there are a lot <strong>of</strong> agents outthere who simply don’t believe the optionalfeatures are worth the money.Whatever path you take to write morebusiness during uncompetitive times,your efforts will yield some results. Thequestion agents in these markets shouldbe asking is “What is my return on thetime, money, staffing and effort it takesto write each policy?” In other words, is itworth your efforts to continue poundingaway day and night to write a few apps?That being said, if P&C rates in yourarea too high, it may be time to thinkabout getting involved in a secondarybusiness that won’t interfere with the operation<strong>of</strong> your agency. There are manybusiness opportunities available that canwork in tandem with your insurancebusiness. NAPAA has identified threesuch businesses and is looking for more.We want agencies to thrive even whenlocal market conditions make it tough to<strong>Fall</strong> 2007 Exclusivefocus — 13
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