Departing Allstate agents face tougher severance policy

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Departing Allstate agents face tougher severance policy

Unread postby RatPak11 » Sat Jul 07, 2012 3:12 pm ... nce-policy

Departing Allstate agents face tougher severance policy
By Steve Daniels July 06, 2012

(Crain's) — Allstate Corp., facing mounting agent defections, is moving to make it harder for agents to leave and set up competing businesses as independents marketing cheaper insurance for other carriers.

Beginning next year, the Northbrook-based insurance giant will make termination payments over two years rather than one, as is the practice now. Allstate informed agents of the change on July 1.

That likely will spur more agents to leave Allstate this year as those mulling whether to stay or leave take advantage of the more generous severance policy before it expires, said Jim Fish, executive director of the Gulfport, Miss.-based National Association of Professional Allstate Agents, which has been at loggerheads with the company over recent treatment of agents.

“For the folks that have been on the fence over whether they're going to stay or not, this could be the last straw,” said Mr. Fish, whose group represents more than 1,000 agents.

When agents leave, Allstate pays them 18 months' worth of commissions if they adhere to terms of a non-solicitation agreement. By paying the money in monthly installments over two years instead of one, the company makes it harder for former agents to get by financially as they launch a new, independent agency and also leaves open the possibility of withholding payments over a longer time frame if the company alleges improper competitive behavior.

Allstate didn't respond to a request for comment.

Allstate's agencies numbered about 10,000 at the end of last year, down from about 14,000 in 2008. The number of agents declined 13 percent just last year. In internal documents late last year, the company admitted that the loss of agents in 2011 was resulting directly in a decline in auto customers.

Long the No. 2 player in the hypercompetitive auto insurance industry, Allstate risks ceding that spot to fast-growing online insurer Geico.

Allstate has alienated some agents by cutting their base compensation, consistently hiking auto and homeowners premiums to the point that the company is uncompetitive among many customer segments and firing agents who don't meet sales expectations even though those sales reps are independent contractors responsible for their own overhead and benefits.

More recently, Matthew Winter, president of Allstate's auto and home businesses, has engaged in something of an agent charm offensive. Mr. Winter assumed responsibility for agent relations in February.

In a recent open letter to an unhappy agent who had written him in similarly open fashion, Mr. Winter mentioned the change in severance payments but didn't say why the company was making the change.

He did, however, confirm that Allstate is getting more aggressive in clamping down on departed agents who become independents and attract former Allstate customers. Currently, Allstate agents' contracts bar them from soliciting former customers for a year and also require them to locate their new offices no closer than a mile from their old Allstate digs.

“In recent months, we have stepped up our enforcement efforts under the current non-compete to protect the enterprise and those local Allstate agents who are working hard to service and care for customers previously associated with a former agency,” Mr. Winter wrote. “If this doesn't work, we may revisit the terms of the (non-solicitation) agreement.”

Agents have speculated that Allstate may try to extend the term of those contracts to two years as well, but Mr. Winter said the company foresees no changes “at this time.”

Still, Mr. Winter largely was conciliatory in his letter, saying, “My commitment is to work in partnership with the agency force, not at odds with it. I do not think it is possible for us to achieve the vision we have for this company, for the agency force or for our customers, unless we work together, build together and grow together.”

Mr. Fish, a frequent company critic, said Mr. Winter appears to have made the most serious attempt in years by anyone at Allstate to communicate with agents.

“He's been pretty responsive,” Mr. Fish said. “At least, he's talking to the agents, which is half the battle, really.”

But Mr. Fish said he didn't think that would halt the agent exodus.

What do you think?

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