Farmers vs. Independent

[sheltowee86]

Not so fast. I definately emphasize with your situation. I've been with Farmers 18+ years and have not experienced the growth that I would like due to a lot of factors. I often consider an independent agency but what I would really like is to be able to hold on to my agency and write for a few other companies, and be able to sell rate to gain more clients.

The one thing that holds me back is the instability of the industry. You don't know which companies are going to declare bankruptcy yet. The broker's have had an advantage for the past decade over the captive agent. However, with pending regulation this will change. And yes regulation is going to happen. Although, whether it happens or not you want to make certain that you are with a company that is most likely to stay in business. Farmers is looking pretty good compared to other companies.

Farmers does have some issues. Such as, high turnover of agents. I also think a lot of the problems you are having is directly related to what's going on in the industry. Mainly, unfair competition with companies like AIG. And believe this, that there are more like them out there just waiting to implode.

I know Farmers is against regulation but when it happens I truly believe they'll be one that embraces it and will benefit tremdously and we will too.

Regulation can occur without corruption and red tape. We simply need to demand it and expect it.

Independent agents are struggling too. Be careful.

[sheltowee86]

I apologize for the incorrect spelling of empathize.

[djhas1]

1) Are you able to set-up an independent agency with someone who is licensed and have their name as the agent of record and you would be an owner in the entity? I've seen associates at companies like Allstate, State Farm and Nationwide do this. They would get a spouse licensed and have the spouse as the Producer of Record. (Be Careful, I also know someone who did this and had to sell the independent book really fast do to a divorce)

2) Get access to some of the insurance networks so you could place accounts through; (i.e. accounts you can't write with Farmers do to pricing, underwriting etc) Be sure to see at which point you could control the book based on volume/ production etc.

3) Still seek appointments with other carriers. Write policies through the independent arm with direct appointments. If you write Life and/or Health. Get appointed with L&H carriers (easier appt. process), Get appointed for flood with NFIP floodsmart.gov; Contract w/ E&S Brokers for non-standard accounts

4) I'm sure there are many accounts you are unable to write with Farmers; so I'm sure you can build an Independent Book over a period of time.

I've worked on the Carrier side, direct agent side, claims, etc., I enjoy being an independent agent vs. the captive agency.

[ED3771316]

All good points.

Change gears to the commercial side. Plenty of business to be place through GAs'. Ride out the storm on the personal side.

This market is going to change. As more agents bail, you will be around to pick up whats left. When it finally does change, you will have a natural market to expand what is left of your personal book.

[choicearizona]

There are successful agents at Farmer's. If anyone is considering working there the best idea may be to talk with one or more of those agents. It seems to be getting harder for the captive companies to hold onto agents though.
http://www.nationwidedr.com

[gregcw]

.... I've been with Farmers 18+ years and have not experienced the growth that I would like due to a lot of factors....

The one thing that holds me back is the instability of the industry. You don't know which companies are going to declare bankruptcy yet. The broker's have had an advantage for the past decade over the captive agent. However, with pending regulation this will change. And yes regulation is going to happen. Although, whether it happens or not you want to make certain that you are with a company that is most likely to stay in business. Farmers is looking pretty good compared to other companies.

Farmers does have some issues. Such as, high turnover of agents. I also think a lot of the problems you are having is directly related to what's going on in the industry. Mainly, unfair competition with companies like AIG. And believe this, that there are more like them out there just waiting to implode.

Independent agents are struggling too. Be careful.

I've posted on this discussion once already, I was with FIG, but only for 7 years, so most of what I've seen in the last 19 years is from the outside looking in.

1) On the "Brokers advantage" and "pending legislation you've alluded to, I don't know of any regulation that would affect the Independents ability to function as we always have, let alone impair our advantage.

2) On the "Farmers does have some issues". Their High Turnover is fueled by their hiring (appointment) philosophy and training quality - not market conditions.

3) On the 'companies like' AIG and 'unfair' competition. I work with an AIG market but fail to see anything that they have done that could be called "unfair competition". That is unless you are referring to granting underwriting rating credits, that reduce the premium, at an agents request as 'unfair competition'. If they are filed for these credits, and use them, that cannot be considered 'unfair'. This has been an industry pricing practice since L-O-N-G before I became an agent. The reason that AIG has "imploded" has more to do with their management company mis-handling their investments than the operation of their insurance subsidiaries.

This comparable to the 'Farmers Insurance Exchange', The Farmers Insurance Groups managing company. Although FIG is now wholly owned by Zurich, it does not appear that they have assumed the management of the company(ies). In fact when FIG was purchased by Zurich, they went from an A.M. Best "B" rating down to an "A" just as Foremost went down from an 'A+" to an "A" when Farmers purchased them.

In summary as an advantage of being independent vs. captive or 'encumbered' as FIG Agents is that, if an independent loses a market, as does happen from time to time, they are able to move their business to another company either as a 'Book' rollover or on a client by client basis. While I don't anticipate that FIG will be closing its doors, their agents don't have that lattitude. Additionally, as has been noted in other posts, they are not restricted by either the rates or underwriting of one company.

[AgencyEquity]

Farmers is a great place for lauching a career and learn the business. Out of all the captive agents, my experience is that Farmers Agents the most capable and most willing to transition to an Independent Agency than State Farm or Allstate. While you do see State Farm and Allstate agents transition to an IA, it's not at the rate the Farmers Agents do. I feel the setup at Farmers more easily allow for this, Farmers also does a better job at recruiting entreprenuers than these two other organizations.

[InsuranceGuynTX]

I am recently resigned from Farmers because I had too much difficulty keeping up with the quotas; especially with life insurance. I have found that there are more carriers in my area that are much more competitively priced. Great post!

[FFA]

This subject just keeps coming around and around and around. 2.5 years out of Farmers and my volume is much higher then it was. Had $1.5 Mil, left Farmers dipped down to $700K. Should be over $2M by end of my third year out. Of course, I chase the commercial paper and am putting volume on in $15 -$20K chunks. Had enough of $400 - $500 annual premiums.

[JKolak]

I enjoyed reading this discussion. It is 4 years old and running. Currently, I'm employed as a Benefits Director in a government agency. I handle health care, prescription drug, dental, vision care, life and disability insurance for the agency. Over time, I earned the Certified Employee Benefits Specialist (CEBS), Chartered Financial Consultant (ChFC), Chartered Life Underwriter (CLU) and Chartered Property Causualty Underwriter (CPCU) designations among others. Back in 2005, I got my insurance license for life and health and eventually added property and casualty to it in 2010.
I'm now getting the itch to get into the insurance business.

Farmers just came into my state. They tried to recruit me. There were too many unanswered questions. I did not like their quota, for instance, of 4 life insurance policies per month. I had some doubts regarding their policy renewal rates. I sent an e-mail to one of their recruiters back in April with some additional questions I had after an interview. I finally received a response in July that indicated I needed to come in for a second interview in order to have my questions answered.

I know insurance theory but I need some insurance fact from people who are in the front line of the business. If you have my credentials and experience, what would do to get into the business. Go captive (like Farmers), hook up with something like SIAA or Insurance Noodle, go franchise with Smart Choice. Your input and insight is appreciated.

[AgencyEquity]

When you say "get into the business" I beleive you mean you want to start your own agency, correct? You talk about Farmers, but while Farmers does do life Insurance, their bread and butter is P&C. If you want to break into P&C by starting an independent agency, that is a mistake. You need to have experience before you open consider opening up the doors for any agency, most especially with a P&C focus. I would recommend becoming a producer with an agency and learn the business. You may also want to try to produce from someone who is not going to hold you to a non-compete agreement and one that will allow you to take you book with you if you leave. However the larger more organized agencies will probably not allow this, so you probably have to settle with a smaller agency. Regardless to what you do, make sure you know the business before investing a dime in your own venture.

[JKolak]

I like your web site Agency Equity. In fact, it is one of the sites I had marked among my favorites. Farmers didn't tell me their P&C quotas although they did share that their commissions on Homeowner's is 20% new and 14% renewal with Auto at 12.5% new and 10% renewal.

My big problem with Farmers are similar to the issues that Allstate agents seem to have now. Farmers can compete against its own agents by being a direct writer through its 21st Century Auto Insurance subsidiary and it can also sell through other agents through Foremost Insurance Group for personal insurance and Zurich NA for commerical insurance. I would rather have relationships with insurance companies that are firmly committed to the independent agency channel of distribution.

Yes, I would like to start my own agency. I am aware that P&C is the heart and soul of it. I do have a CPCU in Personal Lines and the CISR designation. I do know the theory but don't have the experience in the business.

Thank you for your helpful insight. Don't want to get over my head too quickly for sure. I wonder whether buying an existing independent agency from a retiring owner might be another possible option.

[AgencyEquity]

I like your web site Agency Equity. In fact, it is one of the sites I had marked among my favorites. Farmers didn't tell me their P&C quotas although they did share that their commissions on Homeowner's is 20% new and 14% renewal with Auto at 12.5% new and 10% renewal.

The commissions are not bad, they are higher as an Independent (IA), but expenses are higher an an Independent. But you do have more flexibility and more options going to the IA route.

My big problem with Farmers are similar to the issues that Allstate agents seem to have now. Farmers can compete against its own agents by being a direct writer through its 21st Century Auto Insurance subsidiary and it can also sell through other agents through Foremost Insurance Group for personal insurance and Zurich NA for commerical insurance. I would rather have relationships with insurance companies that are firmly committed to the independent agency channel of distribution.

I don't see Farmers selling direct as a huge issue at all, selling direct only caters to a certain marketplace. The better, more sophisticated and higher premium clients will want a personal agent. But as mentioned, you have more options as an IA, more products to sell and can do much better with commercial business.

Yes, I would like to start my own agency. I am aware that P&C is the heart and soul of it. I do have a CPCU in Personal Lines and the CISR designation. I do know the theory but don't have the experience in the business.

Get experience, the worst thing you can do in invest in you agency and not know how to run it or not know how things are sold. You need to know everything from the insurance policy coverages to knowing what management system to choose and about 10 things in between. While it not difficult stuff, it's easy to make a mistake if you don't have experience.

Thank you for your helpful insight. Don't want to get over my head too quickly for sure. I wonder whether buying an existing independent agency from a retiring owner might be another possible option.

Buying an IA is a very bad idea for those without experience, it’s worse than starting an agency without experience because if you invest a good amount of money and not know how to run it, it will be the worse investment you made in your life. Also most of those selling IA get a plenty of offers from those who already own an agency, that last thing they want to do is to sell it to someone who does not have experience. They not only have to train you, but it is also high risk that something may go wrong with the transaction. There are plenty of opportunities to learn on someone else’s dime by being a producer, that is the best way to start. The only option you may have to buy an agency may be either a non-standard auto agency or an Allstate Agency (Allstate does provide some training), I can’t tell you I would highly recommend either option.

[JKolak]

Thank you for your very keen insight. I do think it will be very prudent for me to take it slow.

[lonestar]

JKolak, my .02 cents is do not waste your time with Farmers. I was an agent for them for over 10 years. They are a different company now than what they were prior to being purchased by Zurich. IMHO, you would be much better served finding an independent shop that will work out a producer arrangement with you, to give you access to the markets(companies) you need, while at the same time allowing you to "purchase" or take a certain percentage of the clients you write with you down the road, maybe 5 years in the future, etc. Also, having the book knowledge of the insurance business and several accreditations after your name is good in the corporate world, but will mean very little to consumers who you are trying to sell to in the field. In addition, you need to analyze yourself, and determine if you have the right type of personality for sales, since you are looking into going into "sales". As an example, many times a person with an underwriting type of personality does very poorly in an environment that requires much interaction with the public in a sales position, and many times a natural salesperson does poorly in an underwriting environment. The average newbie Farmers agent has about a 5% or less chance of making into their own office 2 years into it. This is by Farmers own numbers. So, if you were told by an investment banker that you would have a 95% chance of losing your money by investing with their firm, would you still invest? Not sure who told you that FIG agents get 12% NB commission on auto, but when I left in 2010, Farmers was paying 10% new business auto commission and 10% on renewal. If you quote 10 clients, you will be lucky to write 1. On the IA side, you quote 10, and you should write 7 or 8. Huge difference. There is a rumor that Farmers will be reducing commissions in the near future, basing commissions on sales volume. They call it "incentive based compensation". The average NB and renewal auto commission on the IA side is 15%. Also, with Farmers, you do not own the policies, and they can be taken away from you at any time, no matter how much money and time you have spent. Keep this in mind. All you "own" with a captive company like Farmers is the debt. Good luck to you.