Farmers Agents and Former Farmers Agents: Please Advise

[lukifer]

I have a client wanting to buy a P&C agency and I have been helping him look around to find a decent deal.

Farmers agencies are a dime a dozen it seems. Basically, it looks like you can get one for a song and a dream. The amount of agencies for sale sets up a red flag.

While we aren't looking for captive, given the money to invest we could possibly pick up multiples of these agencies and streamline operations in theory.

My Allstate guy told me that Farmers just bent a ton of their agents over not too long ago and they are looking for new blood.

Anyone have any insight to this or owning a Farmers agency?

 

[BADTROUT]

I'm not a Farmers agent, but I've worked closely with dozens over the last year transitioning them from captive to independent. Farmers agents, if I misstep please correct me... but... I know their commission levels have dropped significantly in the past couple years well below their captive peers and much more compared to Indy.

Shouldn't affect great salespeople right? Wrong! What that means is their contract value... i.e. their nest egg or retirement plan has also decreased by the same percentage. "Thank you for your 20 years of dedication, but now Mr Agent, when you leave you get 30% less than you expected.."

I did some research on how to market to Farmers agency owners... in the states I looked at there were roughly 7k agents. I narrowed it down to ones that had been in business over 3 years, there was less than 2k. HUGE red flag.

If you want well established agencies i know of 3 off the top of my head with a combined tenure of over 100 years for sale because they are forced (or blessed) to have to go Independent.

One example is a 31 year agency owner in Texas that had 6500 households 3 years ago. Today 2900... mass exodus is an understatement.

I'm sure there are super successful ones that will tell you otherwise, and I'm sure there are areas of the country better than others, but IMO, it's too volatile, with so little upside to invest longterm .. short term is a fail i.e. Bailing out the sellers and adding a margin (flipping the book) is impossible as your conversion will be low.

 

[fed up]

Farmers will continue to try to "buy" in to areas and then raise their premiums when the loss ratio gets too high. Not only will you NOT be able to find new customers, based on price, but you will lose customers who compare rates. All of their incentives are now tied into additional life sales and once they figure out that you are content to sit on your BOB when the rate adjustments occur, they will force you to accept a new contract

 

[lukifer]

Good insight. Kind of along the lines of what we were thinking. Its almost like they are trying to make themselves obsolete.

I prefer independent anyways but was willing to entertain the idea.

 

[BADTROUT]

I think its wise to get the opinions of many in this environment where at least you'll get a pointed yet straight answer. These are the words, and this is the street.

 

[fed up]

Farmers was well received in metropolitan Washington Dc on more than one occasion. Each time they were on the brink of pulling out because their loss ration was too great and raising premium was not chasing away the bad customers who could not leave based on loss history. Farmers then opened a call center, similar to GEICO, and pounded away at the phones with brand new agents, cutting into the career agents already in the field. They closed the call center overnight with no warning to the recently recruited agents, just boom there is no job tomorrow. they closed the field center about 8 months later and moved to a much smaller footprint. My friend had lost more than 1/2 of his book when the rates increased and the credit crunch hit. He was offered a new contract with bonus levels or he would lose his existing book with little support from area management or home office.

 

[EugeneM]

They rate their agents and give bonus based on the grade A-D.I have heard good agencies with clean business get d ratings because they wouldnt put Farmers sign outside... When the guy told them they where leaving farmers it turned into nasty letters and such... Not sure how you can treat a 20+ year producing agency that way.

their strategy seems to be to get new blood that is easier to mold their way and the more established guys get hosed.

 

[andy_M]

I was just checking around for BoB's for sale as well and noticed an extraordinary number of Farmers agencies for sale and just a few All State agencies.

One reason is--- Farmer's actually lets you sell your agency, whereas State Farm does not, so IF State Farm let their agents sell, there might be this many SF shops for sale. In my discussions with Cluster/Groups, I've been hearing a lot of similar info (ie- they are screwing their agents). This is the hazard of the captive agency. I looked into the captive agency approach and found the agreement to very one sided. They can raise their rates, screw with your commission structure, jack your quotas and you are stuck.

The ones I'm seeing for sale in my area have been in business for a while.

 

[Rob Lion]

I almost went with Farmers when i was a new blood, and they have crazy quotas and told me even if met them at the end of my training they could still let me go.

 

[andy_M]

I almost went with Farmers when i was a new blood, and they have crazy quotas and told me even if met them at the end of my training they could still let me go.

This bodes well for the indies. When I was writing up my biz plan for State Farm, I was surprised that most of the market in my state was NOT with the big names. Per the above- that can happen at State Farm too. Apparently they will have their regional sales lead breathing down your neck and you'll be chasing goal posts that move and often not even published...and forced to sell lines which aren't competitive. I cringed this past weekend hearing my niece sold another family member Life through them... she's just a new agent and is completely unaware of how uncompetitive their Life products are.