How is Farmers Insurance surviving?

[Jake Lane]

I work with a lot of Farmers Insurance agents, and 100% of the time I talk to them, they'll go on a 5-10 minute rant about their rates, and how they're not even in the realm of competitive. For one example a guy told me that it's costing people about 10k/yr for home insurance.

Based on the fact that their rates are through the roof... I just had a few questions.

1) How has Farmers Insurance not gone completely underwater at this point? It's now common knowledge that their rates are laughable.

2) Why would any insurance agent continue to be a Farmers' agent? Am I missing some HUGE piece of this picture? I know Farmers will do some marketing, but it's super weak and not very effective marketing, not to mention no matter where you're located you're going to be competing with 3+ other Farmers agents right next to you.

3) Time spent on non-revenue activities - I feel like Farmers' agents honestly spend a massive amount of time just quoting people, and with the rates they have, they more than likely don't move beyond this initial quote.

I was just wondering what is it, that you Farmers' agents do to stay in business, and how can/do you compete with the rates you're forced to live by?

Thanks, to everyone who participates by providing me with some feedback!!

 

[Markthebroker]

@marindependent do you have any imput on this?

 

[Jake Lane]

Not a whole lot of input no, and I wish I did have some quality input but what I can say is that they're typically a lot easier to convince to use our services.

That's because their rates are so high, it's easy to "sell" them on the fact that they need to stand out way beyond their competitors and that the people willing to spend a lot more on a policy with a company like Farmers' are the same people who live and die by reviews, quality, reputation, and typically aren't hurting financially, so they choose to buy more for service, and special treatment, but that's a small fraction of people. There is a whole lot of truth to this though, and it's probably why about 60-70% of all of our clients are Farmers' agents. When we work with Farmers we do add another level of "done right" and "professionalism" to their agency.

I just wanted to ask because, at the end of the day, I and a lot of my colleagues are so confused as to why any insurance agent would choose to work with Farmers Insurance knowing the obstacles they will run into. I'm just thinking there has got to be something I'm missing.

So, in short, no I don't and I'm sorry for that!

 

[marindependent]

Why would any insurance agent continue to be a Farmers' agent?

Because they [the agent] has a contract that requires them to only do business through the Farmers group of insurers. If they leave this contract they lose their exisiting client base.

I feel like Farmers' agents honestly spend a massive amount of time just quoting people, and with the rates they have, they more than likely don't move beyond this initial quote.

Not sure I understand the question here. Have you worked P&C before? There is a ton of non revenue activities in this business. Efficiently managing it is the name of the game.

How has Farmers Insurance not gone completely underwater at this point?

Simple - because their losses have not exceeded the premiums and other income generated each year.

Frankly I think what we may be confusing here is the Corporate Farmers Insurance Company here vs a specific Farmers Agency. They are totally different PL statements.

 

[Markthebroker]

In all fairness I spend a lot of time during my workday doing things that don't generate revenue. I'm about to leave the office to go to the gym, then sunbath, if the stupid weather cooperates. Tomorrow I am getting a massage, then hiking, again, if the weather cooperates. Plenty of gym, hiking, swimming, and perhaps some dirtbiking. Oh, and lots of yoga too.

It's because of the renewal commish that I get to do those things.

 

[tikibarrister]

You missed 4) oversaturation. How many Farmer’s agencies are in big cities? One on every block.

Farmer’s, Inc’s main customer is not consumers needing insurance. It’s agents starting doomed agencies.

 

[marindependent]

Oh, and lots of yoga too.

I bet you wear those pants...

 

[Markthebroker]

 

[Jake Lane]

Because they [the agent] has a contract that requires them to only do business through the Farmers group of insurers. If they leave this contract they lose their existing client base.

That makes sense, in my experience that is VERY rarely brought up, if they are thinking about it. When they do bring it up, it's so simply to overcome.. "Look every other Farmers agent is already doing this, Farmers' even have us speaking on their webinars.".

Not sure I understand the question here. Have you worked P&C before? There is a ton of non revenue activities in this business. Efficiently managing it is the name of the game.

No, I've never sold insurance. It's probably the biggest complaint I've personally heard from the agents I've spoke with.

Simple - because their losses have not exceeded the premiums and other income generated each year.

Obviously, that's the raw question of my question. How have they continued to bring in more than they spend, which I think is probably answered a few post below, and that's from the cost of individual start up agent cost.

Frankly I think what we may be confusing here is the Corporate Farmers Insurance Company here vs a specific Farmers Agency. They are totally different PL statements.

They should go hand in hand until you think about what corporate brings in with the new agents they recruit, who also end up spending their life savings to get going.

 

[Jake Lane]

You missed 4) oversaturation. How many Farmer’s agencies are in big cities? One on every block.

Farmer’s, Inc’s main customer is not consumers needing insurance. It’s agents starting doomed agencies.

Yes, I did! And I think you nailed it, that's how they're still floating... their net profits are probably more in recruiting new agents than their residuals.