Agents at the Capitol

There were about 11 of them in the House insurance committee hearing room. These 11 Allstate “independent contractor” agents had left San Antonio that morning just after 7 a.m. They were joined by a few State Farm agents at the state Capitol to testify before legislators about the need for protection from insurance companies that could terminate their contracts at will. More than 100 agents said they wanted to be there, but feared retribution.

House Bill 1384 sets out that if an exclusive insurance agent were to be terminated, there would be a specific review process to determine the fairness of that termination. On the surface, this bill only deals with captive agents. But its implications describe a condition that affects all agents. Rep. Ciro Rodriguez originally introduced the bill in 1997. But an opening in the U.S. Congress, followed by Rep. Rodriguez’ campaign for the position, left the bill marooned with no champion. The sponsor this year comes in the form of Rep. Jim Dunnam, a Democrat from Waco.

He said he was oblivious to the problem until talking to his friend/captive agent in Waco. He was appalled to find out that they could pull up roots with the agent but keep his business. “I’m with that company because of him,” not because of the company.

Many of the agents were furtive with their testimony, fearing retribution from their companies. The first Allstate agent called to testify asked for a guarantee that he would not be fired for testifying, a guarantee the committee could not give. The agents’ fear was justifiable. One of the things Rep. Dunnam passed around the room was an agreement that every Allstate agent was made to sign. The “agreement” said that an agent could be terminated for communicating with their legislator.

Many of the insurance committee members seemed sympathetic with the agents. Rep. Gene Seaman, a Republican from Corpus Christi, was the exception. Before even hearing what the agents had to say, he recounted his experience. When he was a “poor, dumb kid” he chose to be a captive agent. The perks and stability were attractive. Later in life, he switched to the independent agency system. He believed that no carrier would let go of an agent if they were “a good producer and honest.”

Which meant that the 11 agents testifying before him, all of whom had their agency contracts terminated in a nationwide contract switcheroo, would have to be either liars or bad producers.

In fact, if we go further with Rep. Seaman’s premise, the 29 percent of Allstate agents that had their agency contracts terminated in 1999 and replaced with a new contract must all be fibbers and poor salespeople. There are apparently thousands of dishonest agents out there just waiting to be cut loose by their honest carrier partners.

Obviously, Rep. Seaman is wrong. He’s either operating on a belief that nothing has changed over the last 20 years or is oblivious to the evidence. As much as we’d like to believe that the insurance industry is one big happy family, that its goals are cohesive and encompass the beliefs of all of its members, it is certainly not the case. Insurance companies are for-profit. They do things with the bottom line in mind.

As independent agents, be glad this isn’t your fight, but be sympathetic to the battle. These agents that are quickly being shown the door as insurance companies look to alternative distribution methods might be joining you soon as your co-workers and competition. And the battle over contracts, and terms of those contracts, are things that every agent should be closely watching.

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