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"The Peaceable Kingdom"
"Building a company without factionalism, fiefdoms,
fear and other staples of modern business."  
 [fiefdoms- The estate or domain of a feudal lord; Something over which one dominant person or group exercises control]
Stan Richards, The Richards Group-
Perhaps, their pro- independent thinking will rub off on Farmers
(Richards Group is the newly selected ad agency for FIG.)

 .Website link

PIF used to be the buzzword with the Direct Writer Companies until the last few years. Independents have most always spoken in Gross Written Premiums (GWP). Farmers jumped on this bandwagon a few years back and it has become so intense internally, they now are naming their contests GWP while market share is no longer in the corporate lingo.                                                      
There is little doubt that GWP is the best way to grade or compare an insurance company as GWP is used to select the top companies in the industry, to determine profits & losses, commissions, and of course, bonuses.

However, the internal competition between management and the agency force has seemingly placed us onto a dead end street or is it a death spiral?. We learned over 20 years ago that one cannot hike the rates unreasonably. We did that on Oklahoma auto in 1985 with a 24% rate hike and agents lost hundreds of PIF as well as the related GWP. In 1987, DMs were threatening agents with the Limited Underwriting Authority (LUA) resulting from losses exceeding earned premiums. (LUA was an unprofitable penalty program where agents lost their binding authority in Farmers  All NB autos were submitted in MCA. DOI's either passed legislation or issued administrative rules to prohibit such programs as being discriminatory to the insuring public.)

There was such an agent uproar that Farmers created "Pricing Committees" across the operating territory. They decided to hike rates only a few percent on a regular basis to keep up with inflation and loss factors. But, those committees are long gone and the state office newbies came along and have continued to hike rates to deplorable levels, running off PIF by the hundreds of thousands in this state, as state directors compete for the next open V.P. throne in L.A. Unlike the past, the agents have remained silent, allowing it to continue, seeing their PIF stagnate or deteriorate- watching their business slowly go out of business. Even those 17% in the above Market Share poll stating income as remained level over 5 years, may not have considered 5 years of increased business expenses into account before answering the poll.

The agents in an effort to hold on to clients work the rates downward plugging in unwanted deductibles and coverage reductions has only placed the agency force and management into a death spiral that cannot last. Unfortunately, we have hit our limit on premium reduction options and the company keeps hiking rates on a lower number of policyholders in larger per policy amounts that even our most loyal clients are giving up on us and going to competition as they see the last renewal discount has evaporated on the current renewal.

 

The numbers tell the Oklahoma story as our total ANNUALIZED retention is at 79% or a 21% average loss of PIF in policies annually. That means, in a 1,000 PIF agency you have to write 210 policies annually just to break even. But, the household numbers tell of a continuing deterioration of the lack of NB PIF.

In December of 2007, Oklahoma had 288,621 households. In December of 2008, that figure had dropped to 271,810- a loss of 16,811. That loss breaks down to 6,942 households lost through the 2nd qtr. of 2008 and the balance of 9,869 lost households through the 4th quarter, and that includes new business written in 2008.

TYPE         DEC 2007         DEC 2008           G/L          Okla. Agts       Agt G/L   
H/H              288,621            271,810        -16,811*              460             -36.5  avg.
Est. PIF        606,104            570,801        -35,303*              460             -76.7  avg. 

GWP              unk            +$13 million 

Let's compare the last nearly 10 years from 1999 shortly after the State Office was created in 1998. Searching the records there are very few months during this period that H/H and PIF spiked. In fact, both have fallen in every year since mid-1999. We will break this down by state director. Looking back, August, 1999 was our highest H/H/PIF ever in the state.

DATE       STATE DIRECTOR     START  <households>   END        H/H G/L       PIF G/L
08/99             Ron Coble           368,752                         353,259     -15,493        -32,535
08/00      Jim Westerman          353,259                         289,747     -63,512       -133,375
04/05 -12/08   Gregor Scott        289,747                         271,810     -17,937        -37,668
Totals                                                                                            -96,942       -203,578* 
*Household and PIF numbers include new business written within the periods! For consistency in these estimated figures, households are x 2.1 to obtain PIF. Figures primarily contain PIF for fire, auto Comm'l & life.  Based on 203,578 loss in PIF @460 agents = 442.5 PIF over last 10 years. Only recent GWP figures available. Coble and Westerman are Sr. VPs in L.A. and, like them, Scott just may make it to L.A. at the expense of every agent's folio and contract value retirement. It appears the average agency PIF has dropped to under 600 at the end of 2008 or 590 PIF by our overly conservative count. For 2009, there will be 16,811 fewer households paying the increased GWP leading Oklahoma closer to the break-even point where accelerated loss of PIF may actually trend GWP to a negative balance compared to previous years. It cost Oklahoma agents the least PIF to make Coble a VP and 4 times as much to make Westerman a VP while Scott is now in second place.

"We don't get to drive the train, blow the whistle or ring the bell. But, when the darn thing jumps the track, guess who catches hell." Farmers has selected the Richards Group as their ad company. Richard's has filled the airways with very positive ads over the last few weeks about the stability of Farmers. If Richards only knew the other side of the story of the growing un-stability with the Farmer's Agency Force. Let's check the "Pulse of the Agents."

Are Farmer's ServicePoint Underwriters Violating
Oklahoma Insurance Laws?