EF summer 08.indd - National Association of Professional Allstate ...

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elated bonus. His first step is to notify his AVP and all the TDLs in his region that it is unacceptable for them to not be on pace for their bonuses. The TDLs then inform all of their MDLs that it is unacceptable for them to be less than on pace for their bonuses. The MDLs subsequently turn up the heat on their agents. The agents, reacting out of fear of termination, begin to miraculously sell more life insurance. The Carrot, then the Stick Allstate’s recruitment process is extremely short by State Farm standards. Prospective Allstate candidates are aggressively sought-after and are culled down from either a state data base for licensed agents, referrals from Allstate employees or, atypically, from walk-ins. Prospective hires are given glowing RFG “what if ” scenarios and encouraged to look for possible office locations. During discussions with the prospective agent, Expected Results (quotas) are seldom mentioned and Agency Standards and Supplemental Manuals are kept out of view and not made available until around the time a formal contract is presented and signed. Total time for Allstate to identify and hire an agent is typically less than six months. New agents receive intense daily contact and are coached about the rewards for exceeding minimum production standards. Checkpoint meetings (control) are always performed with RFG bonuses as benchmark minimums and financial services production as the main focal point. Early on, agents receive indoctrination into focusing on Allstate corporate goals and are quickly assimilated into a team mentality (control). Managers constantly remind agents of bonuses, awards and the benefits of meeting RFG goals. These are in reality, Allstate management minimum production requirements. It is only when an agent’s production in Financial Services is lagging that we get a glimpse into the true nature of Allstate’s agent/ company relationship. As an agency matures, a subtle shift occurs between aggressive solicitation for new business to that of sales and service. Mature agencies can be top-heavy with customer service as agents begin to focus on retaining their hard-earned customer base. For the tenured agent, reaching and perpetuating a satisfying level of income is what it is all about. For Allstate, this represents a loss of focus and for an IDL or MDL in particular, it spells lower bonuses. Agents who concentrate more on auto production and retention than life insurance, can expect to receive a letter from their IDL/MDL reminding them where they stand in regard to their RFG bonus and Expected Results. This none too subtle letter is meant to intimidate the agent. This situation represents an example of two worlds colliding. In one world we have an agent with superb loss and retention ratios whose expertise and comfort level lies in selling and servicing P&C products. On the other hand, Allstate wants its agents to write more life and financial – and agents who don’t are not considered team players. Since it is these agents that jeopardize the bonus potential of each manager in their “upline,” they are prodded both verbally and in writing to make their numbers. There is no positive motivation at this point. It is abundantly clear that management has little patience for noncompliance with Expected Results. Failure to show substantial improvement can result in termination. Like any other company, Allstate is in business to make a handsome profit. But unlike some other agent-based companies where profitable agencies are the cornerstone for their success, Allstate sees little value in retaining profitable agencies that don’t produce enough life and financial business to get their “upline” managers a hefty bonus. This line of thinking is ludicrous. Companies like State Farm don’t go around firing agents arbitrarily. At Allstate, it seems that management wants to pound square pegs into round holes. Which brings us back to Allstate’s hiring process. You know the drill. Pass a track test, demonstrate that you have enough money to live on for six to twelve months, pass a background check, commit that you’ll get your series 6 and series 63 licenses and, chances are, you’ll qualify as an Allstate agent. The dirty little secret here is that, compared to State Farm, Allstate’s investment in an agent’s success is minimal. Yet the newbie agent has committed to investing his life savings in a business opportunity he knows very little about. He knows very little because he’s told very little and, in most cases, is not privy to the Agent Agreement or the Supplement until he signs the dotted line. After training in Chicago, he is at the mercy of his MDL and his NAC. If they are caring, competent and attentive, he stands a chance. If not, he’s thrown to the wolves with little or no training – a recipe for financial ruin. It would seem that, in many cases, Allstate hires highly motivated sales people who are poorly qualified entrepreneurs. In contrast, State Farm prefers highly qualified entrepreneurs, period. The State Farm system relies on a two year vetting process resulting in a lifelong commitment, stable agency production and high customer retention. Allstate sees its business model as one where controls are exerted by management to force agent goals to align with corporate goals. New Allstate agent candidates are always available to replace nonconforming, non-bonus producing agents – an egregious practice that encourages constant agent turnover. Putting the Pieces of the Puzzle Together This disposable agent program is counter-productive. By Allstate’s own admission, agent morale continues to be low, with the most recent survey indicating a drop from last year. It would seem that the company has bought into the hype that workers no longer have any loyalty to their employers, so it has taken the tack that agents are among those who have no loyalty. Nothing could be further from the truth. Agents who come to work for Allstate want a career, not a job. They willingly invest tens of thousands of dollars to fulfill their dreams of owning a business from which they can eventually retire. Does making a substantial investment in an Allstate agency sound like a short term plan On the contrary, the reverse is true. Not only are agency owners loyal to Allstate, but most want a long and satisfying career. What is it about this picture that the company doesn’t understand By the time agents receive this issue of Exclusivefocus, hundreds, if not 28 — Exclusivefocus Summer 2008
thousands, of agents will have received letters advising them that they must make substantial improvements in AFS production. Many will fail. And agent morale will plummet once again. Based on its actions, it would seem that Allstate is smitten with a “what are you going to do for me today” mentality. Instead of taking a long-term approach like State Farm, company management appears to be focusing on an “instant gratification” philosophy. Dedicated, longterm agents who have built their agencies customer by customer are no longer revered because, in many cases, they don’t submit the volume of AFS business the company desires. The fact that these agents have spent 30 years or more nurturing customer relationships means little to today’s managers. Evidence of this pervasive mindset abounds. At a 2008 kickoff meeting in Tampa, Florida, MDL Betty Lauro insulted seasoned agents when she proudly proclaimed that more than 50% of the agents in the Bay area market had less than three years service. Is this a statistic to be proud of In most industries, even within our own, experience matters. When agents leave Allstate voluntarily, there are few acknowledgements or “thank yous” for their years of valued service. And after leaving the company, it’s as if you never existed. It wasn’t always that way. Back in the days before the 2000 mass conversion, many regions honored agents with long tenures. Management acknowledged and respected those who had spent their careers on the front lines, building the Allstate brand. Retirement parties were commonplace and were oftentimes sponsored and paid for by the company. Today, such an event would be a very rare exception. Apparently the company has made a conscious decision to rid itself of its experienced agents so as to not taint the minds and attitudes of its new crop of agency owners. But the story does not end yet. Consider Allstate’s most recent cost shifting program: Agent Choice Technology (ACT). Agents now pay for: rent, electricity, phone service, advertising, yellow pages, letterhead and envelopes, MVR expense, employee expense, postage, and miscellaneous office expenses. When Allstate completes ACT implementation, the only thing agents won’t pay for directly is after-hours service. Given this scenario, the question agency owners should be asking themselves is “What is Allstate’s value proposition for me” Not only will Allstate agents be paying for nearly all of their own expenses while they earn a fraction of their independent agents counterparts, they are hounded for more AFS production. Then, when they don’t make their numbers, they are threatened with termination. Besides the potential resale value, say between 2 to 4 times renewals, of an agent’s book of business and the “privilege” of being able to represent the Allstate brand, there really is very little else the company offers its agency force in terms of a value proposition. But is there a better way Allstate only With an apparent all-out assault on agency owners who haven’t met their AFS numbers in progress, it appears the company is growing desperate. has to look to its main competitor for the answer. State Farm, the perennial market leader, does more with less. Fewer agents, fewer managers, yet higher sales. It would make much more sense for the company to lop off a few layers of management instead of firing agents. When asked about the value their MDLs bring to the table, most agents overwhelming agree that while they try hard, they are generally “useless.” By eliminating every IDL, MDL and most TDLs, Allstate could immediately add to their bottom line profitability. Salaries, benefits, 401ks, car allowance, and, of course, bonuses for managers must total in the hundreds of millions annually. Giving up this bloated system, however, would loosen the company’s reins over its agents. Never mind that such a move, if implemented properly, could cause a positive paradigm shift for the company and the agency force, plus save millions of dollars a year. Would agents run amok The answer is no. The vast majority of agency owners are responsible business owners who understand full circle selling principles. Allstate’s pyramid management system has worked for decades. Is it still “working as designed” or are we beginning to see chinks in its armor With an apparent allout assault on agency owners who haven’t met their AFS numbers in progress, it appears the company is growing desperate. Competition continues to make serious inroads into Allstate’s vaunted market position. The company has responded by increasing Expected Results quotas while it announced a cut in life commissions – a move that is sure to motivate agents to sell more AFS products. In another attempt to increase the [ ] company’s eroding PIF base, it has announced “Emerging Businesses” pilot programs in a few states, including Florida, Texas, Colorado and Pennsylvania. The plan is to incentivize agents to sell Motorcycle, RV and Renters by paying first-year commissions as high as 30% on these products. As appetizing as this may sound, the devil is in the details because renewal commissions can be as low as 2% for the life of the policy. Hypothetically, an agent selling 1,000,000 of this business would earn a whopping $300,000 in first-year commissions – not a bad return. The downside is that the renewal income generated from these policies only amounts to $20,000 a year, assuming a 2% commission rate. Based on these examples and those in Canada, it looks like the company has set its sights on lowering agent commissions. It has become more apparent, at least to this writer that, not only is the Summer 2008 Exclusivefocus — 29
Page 1 and 2: Exclusivefocus Summer 2008 An Offic
Page 3 and 4: We finance Allstate books of busine
Page 6 and 7: president’s letter Farewell Messa
Page 8 and 9: usiness opportunities to increase a
Page 10 and 11: letters to NAPAA I wish to terminat
Page 12 and 13: letters to NAPAA ker friends are la
Page 14 and 15: letters to NAPAA I appreciate you
Page 16 and 17: 16 — Exclusivefocus Summer 2008
Page 18 and 19: the thief becomes your health infor
Page 20 and 21: agent issues The Kafka Interview IN
Page 22 and 23: [ “I think that Canada is the tes
Page 24 and 25: usiness Would You Like Fries With T
Page 26 and 27: feature There Must be a Better Way.
Page 30 and 31: company is “unwilling or unable
Page 32 and 33: Is a sea of paperwork slowing you d
Page 34 and 35: membership musings Standing By You
Page 36 and 37: whether spending this amount of mon
Page 38 and 39: AAs most of you know who have been
Page 40 and 41: technology What To Expect When It
Page 42 and 43: integrated or separate video card,
Page 44 and 45: onus from Allstate, such as the rat
Page 46 and 47: technology Allstate Agents Have a C
Page 48 and 49: June 10, 2008 Ladies and Gentlemen
Page 50 and 51: on my behalf. Allstate did offer to
Page 52 and 53: and better refine your analysis. If
Page 54 and 55: staffing Is Your Staff “Engaged
Page 56 and 57: usiness tips Stronger Documentation
Page 58 and 59: organizing your business Forming an
Page 60 and 61: the NAPAA market place Agencies for
Page 62: the NAPAA market place Agencies for

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