Farmers Agent "selling" Policies to Independent

[ColoradoIns]

I recently inherited my uncle's independent insurance agency in the event of his passing. It came to light that he was working with a farmers agent; the arrangement being that the farmers agent would write business through his companies, and the farmers agent would then take a cut of the commission. The farmers agent is now invoicing me and demanding a large sum of money, and I would like to get some perspective on this. It seems not only unethical; but I cannot understand how Farmers would allow something like this? Is this even legal? I am in Colorado by the way. Any and all responses are appreciated.

 

[insurance1822]

1.) I would immediately involve an attorney.

2.) I would immediately involve an attorney.

3.) He most likely is NOT allowed to do this via his Farmer's contract. In addition if he was doing this without a brokerage agreement in place w/ your uncles agency, or without the insured being notified of the relationship etc..he could be in trouble.

4.) You may have a legitimate claim to tell this guy to go f*ck himself & he will get screwed over by default of the arrangement he was running w/ your uncle.

5.) If this guy has the nerve to simply (and without good communication...) throw our demands for money...you may want to consider my aforementioned approach.

6.) How much business are we talking here? aka how much premium?

 

[ColoradoIns]

I was going to contact the estate attorney on Monday (I am also the executor of the estate). He does have an alleged contract, though I do not know the authenticity of the signature. We are talking about 40-50 policies or so, with a claimed commission of 8000.00. I do not know what the total premium is. He claims that these are policies he could not right through farmers.

 

[Josh]

I was going to contact the estate attorney on Monday (I am also the executor of the estate). He does have an alleged contract, though I do not know the authenticity of the signature. We are talking about 40-50 policies or so, with a claimed commission of 8000.00. I do not know what the total premium is. He claims that these are policies he could not right through farmers.

It's not uncommon for captive agents to have relationships with independent agents similar to what you're describing. Generally the captive carrier would be strongly against that and it may very well be against their agent agreement.

Alternatively, they could simply be splitting commissions with another legally licensed agent and it's entirely possible this is all above board.

If he has the agreement in writing then that probably leans more towards being legitimate. One relatively easy way to determine the validity of the claim is simply to look through the checks/payments your late uncle wrote to see if there were any payments made. If every month he was writing a check for $8,000 to this guy and now he thinks he's owed $8,000, then that might track.

 

[jkearns]

As a Farmers Agent, I can speak for this agent and say, "Farmers is a quasi-captive, due to that if Farmers doesn't write it, have an appetite for it, declines it, or non-renews it, then pursuant to the Farmers agency agreement, we are allow to take it to an outside carrier, by either a direct appointment or an intermediary, such as an Administrator, GA, MGA, Wholesaler, etc."

Farmers, does have it's own GA, called Kraft Lake Insurance Agency, which agents can write/referr business through. I don't believe the GA is much older than five years old or so. Depending on when there relationship started between your Uncle and the Farmers Agent, he might of had a broker relationship with your uncle. It does sounds like your Uncle was acting as the GA or Wholesaler for the Farmers Agent, which means the Farmers Agent would own the expirations on those polices and if he has a legitatment agreement with your Uncle, then there is nothing you can do.

If I was the Farmers Agent and depending on the broker agreement they had arranged, I would just broker all those polcies to another intermediary immediately. All that the Farmers Agent would have to do is contact all those policyholders and have them sign an agent/broker of record change, plus possibly a letter to the insurance carrier to review asking for this, simply because of your Uncles passing. The carrier would more than likely switch those policies over from you uncles agency to another agency appointed with those same carriers, for that Farmers Agent to write/referr busines to. It's that simple and depending on the agreement, it's nothing much you can do about it.

Since your Uncle passed, you may want to go ahead and try and sell it or get licesend and take it over. Beacuse your uncles book could be in jeapoardy, if you have no one doing service work and doing the day to day operations of the agency. Those exisiting clients may find or locate another agent who offers that carrier and ask to do an agent/broker of record change, which means that book value might start dwindling. What carriers did you Uncle represent and do you have office staff servicing and performing the day to day operations?

Since, I am not appoined to write for Farmers in my non-resident states I broker lots of policies and have done lot's of broker of record changes, since Farmers opend it's own GA. Our GA represents many of the carriers that most wholesalers represdent or give you access to such as Superior Access, Agent-Secure, etc.

 

[insurance1822]

If you don't have intentions on taking over the operation then you should approach all local independent agencies & let them know you're on the market to sell. Let them bid each other up & advertise online as well. You'll have people all over the place trying to buy it. Despite what some jack offs on here will claim, you can 100% get 2x the annual income if not more. Depending on the size of the agency you may wanna make a career change my friend because the opportunity to buy an Indy agency is a golden ticket

 

[jkearns]

I agree with insurance1822

 

[cgreene]

I just got the opportunity to buy one and turned it down because their business model is failing. All service people no producers.

 

[jkearns]

That's what happens to older agencies. The agent stop selling and doesn't hire producers. You should bought it and put some life back into it. Tell there service team to get licensed, if not or they are out if there and hire some fresh people to help you. That's what I told the service person who I kept on in my transition. She got licensed and she helps close policies.

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Sorry for typos. Hate texting on the phone.

 

[cgreene]

Not interested in operating that business plan and having people walk in the door. Sad thing is the service team does all the selling.