Captive Agent VS Independent Agent: Appropriate Titles


“Fish said that a captive Allstate agent with a $1 million book of business will realize $90,000 in base revenues at 9 percent while an independent agent holding an Allstate contract earns $150,000. “How fair is that?” Fish asked.”

Allstate’s captive agents have been spared part of a planned cut in their commissions as the insurer has revised its compensation strategy.

The Illinois-based insurer confirmed that it would cut its base commission to its agents to 9 percent of the auto and home premiums they write, down from the current 10 percent, beginning in 2013. It had previously said it would cut the base to 8 percent and restructure compensation to reward its larger and the most successful agencies.

The 9 percent will not start until 2013 and will be paid until 2014. The insurer did not indicate what would happen after 2014.

Also, the revised pay program, which was announced before Christmas, provides ways for agents to earn an additional 6 percent in bonuses on top of their 9 percent base. Thus top earners could see total commissions as high as 15 percent of their annual premiums. Now they can earn a high of 14.2 percent.

Those higher commissions come with strings attached, however. The plan aims to reward agency owners who meet what Allstate calls “agency success factors” that include some education requirements, upgrades to office facilities, a minimum staffing requirement, and meeting a quota for sales of Allstate Financial policies.

The previous 8 percent plan was pushed by Joseph Lacher, who was brought in as president of the Allstate Protective personal lines unit in 2009 to turn it around. But Lacher left the company in July of this year before the commission plan was put into effect. The company gave no reason for his departure.

Mark LaNeve, senior executive vice president for agency operations, now manages the agent compensation program.

Allstate said it has worked with more than 300 agency owners on the compensation redesign.

“Our success as a company has been — and will continue to be — built on the strength of our local agency owners and we will continue to work closely with them to ensure the success of the company and our Allstate agency business,” the company said in a statement.

“2012 will still be a transition year, base commission will remain at 10 percent, but we will revise our bonus structure to benefit agents who grow and provide higher levels of customer service. In 2013 and 2014, base compensation will move to nine percent as we begin a phased introduction of variable compensation. This change to base compensation smooths the transition to a variable component and gives agency owners the ability to plan, invest with confidence and align their business approach to the new system,” the statement said.

The plan does not affect independent agents who represent Allstate and who are paid more.

Some Allstate agents were unhappy about the planned cut to 8 percent and a push by the insurer to encourage larger agencies. That discontent fueled an August vote by a group representing about 10 percent of Allstate agents to form a guild and affiliate with a union.

Members of that group, the National Association of Professional Allstate Agents (NAPAA), claim the insurer has been manipulating its independent contractor rules, terminating long-time agents and driving down agent morale— claims that Allstate has denied.

NAPAA agents are not happy with the 9 percent commission either. Jim Fish, the group’s executive director, said his members have “drawn a line in the sand” at 10 percent. “Any less will send good agents to greener pastures – the price they must pay to satisfy the whims of Allstate just won’t be worth it anymore,” he said.

Fish said his members are irked because of the difference between what Allstate’s captive agents will get— the 9 percent—and the 15 percent he said that Allstate pays independent agents.

Fish said that while the agents are relieved that their base agency revenue won’t drop to 8 percent, they remain unhappy.

“They are annoyed that independent agents holding Allstate contracts earn a base commission of 15/15 [15 percent on new and renewal policies] with no strings attached. The amount of work independent agents do to service a policy is exactly the same and their expenses are probably less when ‘agency success factors’ are considered,” Fish told Insurance Journal.

Fish said that a captive Allstate agent with a $1 million book of business will realize $90,000 in base revenues at 9 percent while an independent agent holding an Allstate contract earns $150,000. “How fair is that?” Fish asked.

Allstate also released a statement by one of the members of its Agency Executive Council who supports the revised plan and who said it will help agency owners plan into the future.

“Agents have open access to senior leadership and we’ve been working together on a compensation plan that makes sense. The compensation structure rewards performers who deliver policy growth as well as a high level of customer service,” said agent Jim Towns, co-chair of the agent council. “The change to the compensation structure gives agency owners time to transition their business strategy and the agency owner can plan into the future now that we know the commission structure for the next three years.”