Allstate may shed 20% of its agents - Insurer also raising expectations for agents, like target of generating annual premiums of at least $4 million p

Allstate may shed 20% of its agents - Insurer also raising expectations for agents, like target of generating annual premiums of at least $4 million per location
By Becky Yerak
Copyright © 2010, Chicago Tribune
January 31, 2010
http://www.chicagotribune.com/business/ct-biz-0131-allstate-agents--20100129,0,1436082,full.story


Allstate Corp. insurance agents are bracing for a shakeup that they say could winnow their ranks by about a fifth.

Howard Simpson counts himself among those on the chopping block.

An Allstate agent in central Ohio from 1967 until last month, Simpson said he was asked to either sell his agency by Jan. 1 or accept a $130,000 termination payment. Allstate was unhappy, Simpson said, because the number of policies in his portfolio fell 1.5 percent, or about 30 accounts.

"I had negative growth, but the company's was down more than that," said Simpson, 68.

In 2008, Allstate saw a drop in policies on its books — down 1.8 percent for autos and 4.2 percent for homeowners — as well as a loyalty score shy of company goals.

When an Allstate manager issued what Simpson saw as an ultimatum, his gallows humor kicked in: "I'm assuming Tom Wilson will be leaving the same day I'm leaving?" he said of the chief executive of Northbrook-based Allstate.

The National Association of Professional Allstate Agents expects Simpson's lament to become increasingly common in coming years as more agents are let go.

"We believe Allstate is planning to eliminate between 3,200 and 3,300 agents by 2013," said Jim Fish, the association's executive director.

Allstate, which has 14,700 exclusive agencies and financial representatives, in 2008 wrote premiums of $26.6 billion, or $1.8 million an agency. That was down 2 percent from 2007, a trend Allstate blamed on declining new car sales, a weak housing market and tough competition.

Allstate's new agency targets include generating annual premiums of at least $4 million per location, having one licensed employee for every 1,000 policies, and reaching certain loyalty goals, Fish said.

"The company wants to get rid of agents who aren't actively producing new business," he said. "The ones taking care of customers and servicing the book — they're not interested in keeping those agents because they think they can service those policies at a call center."

Allstate said the opportunities have never been better for agencies "committed to providing outstanding service."

"We're providing incentives and tools for Allstate agencies to consistently provide a superior customer experience," said Maryellen Thielen, a company spokeswoman.

At least one Allstate agent said the new goals are doable.

Jim Towns, an Allstate agent in Addison for about 20 years, expects to meet the $4 million premium mark at each of his three offices and will staff to future company standards.

"The company feels that if you have these economies of scale, you'll be able to take care of the customers" better, Towns said. "They want you to answer the phone, they want you to be in your office, or have someone who is licensed taking care of the customer."

In a 24/7 world, the customer expects more, said Towns, who has seven full-time workers and two part-timers. "My offices are open six days a week, and four of us have iPhones and are accessible when the customer needs us," he said.

Allstate said it is providing agents with incentives to grow and is actively recruiting new agents.

"Our goal is to grow and succeed with Allstate agencies," Thielen said. The company said customer loyalty rose through the first nine months of 2009, but auto and home policies in force declined 1.3 percent and 4.1 percent, respectively, in the third quarter.

Many affected agents will have difficulty selling their shops because of the dearth of available buyers, partly because of tighter financing. So there could be a glut of agencies on the market, Fish said.

Two dozen Illinois agents are advertising on Allstate's Web site trying to sell their businesses. In August 2008, there were only two.

Meanwhile, the prices that the company's agencies fetched fell through 2009, according to the Allstate Agency Value Index. The index is measured by PPC Loan, a Woodlands, Texas-based loan originator for Allstate agents, and is based on Allstate agency sales.

"From the first quarter of 2007 to the end of 2009, the average value for which an Allstate agency has been sold has dropped from the peak of 2.95 times renewal commissions to 2.46 times," said the fourth-quarter report, released Tuesday. That's partly due to a more realistic perception of Allstate agencies by potential buyers, it said.

As of year end 2009, components of the Agency Value Index are at their lowest levels since at least 2005.

The good news: Agency prices have begun to stabilize, and the weeding out of less-effective agencies could boost values in the future, the report said.

"My cell phone has been ringing off the hook by agents told that they'll receive, or have already received, a 90-day termination notice," Bob Isacsen, president of the National Association of Professional Allstate Agents, noted in a letter to members.

Allstate wants to set minimum staffing standards to reduce the time the office is closed for lunch or vacation and cut down on instances of phones not being answered, Fish said.

It's hard to argue against the benefits of proper staffing, but it's only one reason customers defect, Fish said, noting that they sometimes leave because of prices. Many agents being terminated have customer retention rates exceeding 90 percent and earn the company at least $500,000 a year in profit, he said.

"Plus, they've been loyal to the company for decades," Fish said. "Their only fault is that they have not been able to meet their quotas in a difficult market."

Simpson, the Ohio agent, had found one buyer willing to pay his asking price of $450,000. But he said Allstate wouldn't approve him. Simpson, who is now self-employed after starting a mobile notary signing service, eventually found an approved buyer and sold his agency for $370,000.

byerak@tribune.com