Allstate to Reduce Comp 20% and Jettison Small Agencies

Discussion in 'P&C Insurance Forum' started by padthaiforlunch, Sep 27, 2011.

  1. padthaiforlunch
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    padthaiforlunch Well-Known Member

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    Allstate, in Reversal, Looks to Jettison Weak Agents

    From the WSJ.

    Highlights:

    the company says it will cut base pay by 20% for all its agents—who are contractors, not employees—so more money can be paid in additional performance bonuses to the top tier. Allstate also has ramped up an initiative to give its better agents loans to help them buy less-successful agencies and take over their client lists. The overhaul will be rolled out over the next two years. An Allstate spokeswoman said the company had no set target for how many agencies it expected to have once the process is completed. It now has about 11,500 agencies in the U.S.

    Some agents have objected to the company's plans to alter the commission structure. The National Association of Professional Allstate Agents in August voted to affiliate with the Office and Professional Employees International Union, a decision NAPAA said was driven by anger over the changes.

    They're going union!
     
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    Guest Guest

    Wow..........
     
  3. Josh
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    Josh Well-Known Member

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    The title on this is more than a little misleading. They're not going to reduce comp by 20%, they're going to cut the *BASE* comp. On a new agent contract these agents, with their bonuses, can be making 40% on new business! Yes, literally 40% of their premium! For all that folks want to complain about mother Allstate, they do help their agents and many of them do quite well. It also doesn't look like they're going to jettison the small agencies, it's the weak ones they want to ditch.

    The title of this thread could more appropriately be labeled: Allstate to Reduce Base Comp by 20% and Jettison Poorly Performing Agencies.

    Even that doesn't accurately describe the situation. To put it in a sentence:

    Allstate will be reducing it's base compensation by 20%, while increasing bonus money available to reward top producing agencies and cut down on their number of poorly performing agencies.
     
  4. djs
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    djs Super Moderator Moderator

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    You are slicing and dicing pretty thinly to think this isn't a paycut. Why would you write for Allstate at 8% when you can write with other companies and get 10, 12 or even 15%, along with the bonus?

    I agree with the point in the article that to be successful as a P&C agent, you have to have a certain size. It is VERY tough to operate when you don't bring in enough to have a decent marketing budget or to pay staff. It can be done though, at least for a while, but not at 8%, can't really happen.

    And your 40%???? That is a limited time offer, if I understand correctly. You can get that to start with (even Farmers offers this, they call it subsidy) but it goes away after a while.

    Dan
     
  5. Josh
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    Josh Well-Known Member

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    The 40% is a scratch and/or new agent contract and that only lasts for a certain period of time, but as long as an Allstate agent is hitting their numbers they can easily get up to what independents would be getting on similar products and even higher. There is also a lot of branding and back office support that comes with Allstate that makes it more likely for agents to be successful.
     
  6. Bertolinoins
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    Bertolinoins Well-Known Member

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    I had an interesting conversation the other day with a very well established allstate agent and now things are starting to make sense. I have known him for years and he has always been successful selling home and auto along with a few commercial niches. He has referred me lines of business at times to protect his back on the lines he can continue to write. He wanted to meet to discuss coming over to the independent side. That is a pretty drastic move to make after 20+ years with a direct writer and having a successful agency but apparently something is going on that requires drastic measures.
     
  7. Josh
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    Josh Well-Known Member

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    It's a big deal and it's not. If he's been there for 20+ years he's reached his maturity date for Allstate and may very well just be looking to cash out and decided to check out the other side of the fence before buying/starting another Allstate agency.

    Many Allstate agents will buy/start a book, grow it, sell it, and then start the whole thing over again.
     
  8. Bertolinoins
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    Bertolinoins Well-Known Member

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    What do you mean by maturity date?
     
  9. rudy323
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    rudy323 Well-Known Member

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    that 20+ year successful Allstate PC agent is almost for sure not a successful life insurance agent, Allstate bases its contingency bonuses on new business auto items, life insurance premiums and various other things to get up to 3.5% bonus on top of 10% commissions, don't hit your life goal? NO BONUS
     
  10. Josh
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    Josh Well-Known Member

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    My apologies for not getting back to you on this earlier, I read it and it dropped off the radar.

    Allstate agency owners tend to do one of three things:
    -Fail
    -Succeed just enough to take care of themselves, but nothing too interesting
    -Build their agency well, then hit a point where they go "What's next?"

    The third group are the ones that have a maturity date where it hits a point and its' time to "move on", which may mean to buy another agency, sell off and try something else, etc. For lack of a better way of putting it, they've "figured it out". They can continue to stay where they are at and do fine, but the same things that made them successful in the first place make them want to step forward into a new venture.

    Make more sense?
     

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