State Farm Agents on the AA05 Contract

[LuckyLefty]

Active or past State Farm Agents on the AA05 Contract. It's 2015, and this contract is roughly ten years old now. I would like to get feedback from those with atleast a few years experience on the AA05 contract that have taken over a book. I am scheduled to take over a traditional assignment of roughly 1600 cars and 1200 fire polices (1.6million premium) in a few short months.

1)Regarding semi-monthly variable compensation, are you able to meet the auto and fire benchmarks set up on an annual basis and have you dropped below the 2 year default of 10%. If so, what has that done in subsequent years to reach the benchmark again?

2)Many agencies are being split on a 2 for 1 basis and/or starting the new person out in a position where they inherit a book of a maximum of 1.5 million in premium. The remainder of the policies get spread out in the territory. New Market agencies are starting to spring up again per leaderships desire to get more financial services. Do you have any concerns about your ability to continue to grow an agency with more competition (with 25-35% SF existing market penetration) and have 1-2% of renewal and new business commissions forever tied to your agency growth? It seems to be a bit of a hamster wheel.

3) Sales leaders compensation is now closely tied to not only recruiting but financial services sales. What are your thoughts about increasing agents in a territory without any protection from more SF agents? I'm talking about the 2 for 1 model being duplicated over and over.

4)How have file assignments (if any) helped your agency and what are the top two keys in your opinion to netting a livable income ($80,000) with this venture?

5) How is your debt load from building the agency? Did you have to raid your retirement? What is your forecast to pay it back?

6)How much money does a person need to realistically have set aside to make this contract work financially assuming they don't fall victim to lavish furniture programs and keep a sharp eye on controlling costs? Are you able to make the scorecard work and make much off of it?

7) Do the pros outweigh the cons of this and would you do it again?

8) Lastly, assuming you have debt...If a person were to give you a check to pay off your debt would you walk away from the agency today or do you foresee sustainable opportunities in the future?

 

[insurance1822]

We don't have many SF guys on here but hopefully you get an answer. My concern is how many considerations you have when in reality you should be focusing on how to write business & grow your book. All this BS is why the captive model sucks so bad.

Have your wife open an Indy agency to compliment the SF operation.

Man my days are focused on writing new business & I have nobody to answer to. I really hate the captive carriers for how they squeeze their agents & essentially make it more about making SF happy then anything else.

 

[xrac]

Active or past State Farm Agents on the AA05 Contract. It's 2015, and this contract is roughly ten years old now. I would like to get feedback from those with atleast a few years experience on the AA05 contract that have taken over a book. I am scheduled to take over a traditional assignment of roughly 1600 cars and 1200 fire polices (1.6million premium) in a few short months.

1)Regarding semi-monthly variable compensation, are you able to meet the auto and fire benchmarks set up on an annual basis and have you dropped below the 2 year default of 10%. If so, what has that done in subsequent years to reach the benchmark again?

2)Many agencies are being split on a 2 for 1 basis and/or starting the new person out in a position where they inherit a book of a maximum of 1.5 million in premium. The remainder of the policies get spread out in the territory. New Market agencies are starting to spring up again per leaderships desire to get more financial services. Do you have any concerns about your ability to continue to grow an agency with more competition (with 25-35% SF existing market penetration) and have 1-2% of renewal and new business commissions forever tied to your agency growth? It seems to be a bit of a hamster wheel.

3) Sales leaders compensation is now closely tied to not only recruiting but financial services sales. What are your thoughts about increasing agents in a territory without any protection from more SF agents? I'm talking about the 2 for 1 model being duplicated over and over.

4)How have file assignments (if any) helped your agency and what are the top two keys in your opinion to netting a livable income ($80,000) with this venture?

5) How is your debt load from building the agency? Did you have to raid your retirement? What is your forecast to pay it back?

6)How much money does a person need to realistically have set aside to make this contract work financially assuming they don't fall victim to lavish furniture programs and keep a sharp eye on controlling costs? Are you able to make the scorecard work and make much off of it?

7) Do the pros outweigh the cons of this and would you do it again?

8) Lastly, assuming you have debt...If a person were to give you a check to pay off your debt would you walk away from the agency today or do you foresee sustainable opportunities in the future?

Great questions that I hope get answered. A few years ago we had some really sharp SF agents on here. Caliban was the best, a very well spoken/written slightly arrogant State Farm Agent who deleted all of his threads. Some of the threads were very good and all were worth reading. He in my opinion is a pretty sharp cookie. Evidently some SF power that be got wind of his posts, figured out who he was, and counseled him upon the wisdom of what he was doing.

 

[sempaibilly]

First let me make clear I am not yet a SF Agent. I am an Agent Aspirant who works for a Top 100 TICA, but I can give you my best shot at answering your questions.

1)Regarding semi-monthly variable compensation, are you able to meet the auto and fire benchmarks set up on an annual basis and have you dropped below the 2 year default of 10%. If so, what has that done in subsequent years to reach the benchmark again?

During the 3rd year many agents experience what is know as "the dip." During your first 2 years you don't have to work to hit your premium builder. If you don't take the extra 2% for granted you will be fine. The problem occurs when agents get to thier third year and drop from 10% on P and C to 8% not only are they making less they have less to invest in staff and marketing. This can cause many agents to spiral downward.

2)Many agencies are being split on a 2 for 1 basis and/or starting the new person out in a position where they inherit a book of a maximum of 1.5 million in premium. The remainder of the policies get spread out in the territory. New Market agencies are starting to spring up again per leaderships desire to get more financial services. Do you have any concerns about your ability to continue to grow an agency with more competition (with 25-35% SF existing market penetration) and have 1-2% of renewal and new business commissions forever tied to your agency growth? It seems to be a bit of a hamster wheel.


There is some truth to this. In my area they are no longer looking for new market. Splitting the book does 2 things:

Makes sure that you are hungry and allows the sales leader to pass policies to other less established agencies. So even though you may not get the entire book when you open a year from then you could receive another 200 cars when someone else opens. Over saturation and cannibalism are real problems, make sure your sales leader is looking out for you.

3) Sales leaders compensation is now closely tied to not only recruiting but financial services sales. What are your thoughts about increasing agents in a territory without any protection from more SF agents? I'm talking about the 2 for 1 model being duplicated over and over.

I don't think this is a problem as much as you believe it to be, but I can only speak for my market. They are not taking every agent that retires and splitting it hydra style into 2 offices. When a office opens up here anything over the 1500 cars is getting split between the other offices.

4)How have file assignments (if any) helped your agency and what are the top two keys in your opinion to netting a livable income ($80,000) with this venture?

I can't speak to your area but netting 80,000 in your second year is not difficult. Your first year you will make very little depending on your fixed costs vs your average premium for your market. Even in our worst months here we still have done 60 Auto and 30 Fire. That is with 2 sales people. The agent sells only financial services. The Agnet should make 6 figures this year.

5) How is your debt load from building the agency? Did you have to raid your retirement? What is your forecast to pay it back?

Most agents I know go into debt between $25,000 and $50,000 and pay it back within the first 2/3 years.


6)How much money does a person need to realistically have set aside to make this contract work financially assuming they don't fall victim to lavish furniture programs and keep a sharp eye on controlling costs? Are you able to make the scorecard work and make much off of it?

My estimated startup costs are just over 25k, and monthly I have about 17K estimated in expenses.

7) Do the pros outweigh the cons of this and would you do it again?

Can't answer this ask again in 2 years.

8) Lastly, assuming you have debt...If a person were to give you a check to pay off your debt would you walk away from the agency today or do you foresee sustainable opportunities in the future?

Can't help with this either.

 

[infoe]

There used to be a very long state farm thread on this board. Go read that. State farm agent is for minor league. I was an agent three years now in the start of my fourth year indy. Only regret is the time and money wasted at SF

 

[insurance1822]

What keeps you people captive? Do you not realize how much you're being held back? Do you not realize that you'll forever be held above the fire by SF? You may not care now when you're young ... But you will regret this down the road. You have nobody to answer to when Indy, you can write true financial products with whoever you want. Overwhelming close ratios, better pay etc.

I literally see you guys are alcoholics...captive to the very thing that's ruining you. If only you could see the light. I'm sorry (and call me cocky all you want..) but 100k is nothing special at all, in fact it's a piss poor goal. On 4th year Indy & I renew 2x that before I even sell a new policy. I'm turning 30 in a week..

I hate how these captives recruit young talent & keep them blindfolded from their true potential. Can't blame SF for it I guess.. They're trying to grow their brand.

Coming from the same boat & totally understanding the perspective & having successfully broke free I feel obligated (even to people I don't know on internet forums ...) To try & contribute to them reaching the same potential.

 

[AZDave]

In defense of going captive, to be handed an established and most likely very loyal agency is quite a gift. Makes it all the easier to grow and nurture the book to its fullest.

State Farm is the most difficult appointment to get - extreme requirements, so good job done! I know many very happy veteran State Farm agents, but I do know they use to be happier. Just like the rest, the captive Carriers no longer care about the agent - they care about your numbers, period.

22 years captive AMFAM guy here. 6.5 years Indy now. Thankful for the early years of being captive, but not missing the later years at all.

Best to you.

Dave

 

[insurance1822]

To be handed a 1.5MM book at 8% w/ having to staff the thing, write financial products & hit P&C goals w/ terrible products isn't a great thing. What are these guys really netting at the end of the day? Cmon

And so far as P&C growth? forget it. Anything they'd grow by would be 4x faster as indy.

 

[LuckyLefty]

So for an independent guy to start with zero policies and grow it organically seems difficult at best. On the indy side it seems to boil down to purchasing a book correctly (right price) and paying it down over time. With the captive side you are getting capacity (renewals) immediately without a buy in, but then are under the stipulations of that contract/company.
I see the benefits of the indy side but see the barriers to entry as well.

 

[indienoise]

For anyone who is on the fence, might I suggest looking at Nationwide? I'm not sure if I'll be staying with them for 30 years or not, but if I do I can see it working out. Sounds like the commissions blow away SF and Allstate, and Nationwide provides brokerage and market access solutions to their agents - no sneaking around to wholesalers necessary. Dozens of companies for stuff you can't write with nationwide through their brokerage, many of them direct access. I'm directly appointed with Foremost, American Modern, Hagerty, Progressive, and Dairyland. There are others, just hasn't been a need yet for me to pursue them. Have my own login to BTIS and can also get direct access to USLI and I think Chubb? I don't remember the last one right offhand. There are other direct access markets as well, just haven't really needed them yet. I haven't done enough business with our market access to warrant direct appointments yet (haven't needed to, the Nationwide product is too competitive, at least here in SC) but if you can think of a big-name national preferred carrier then yes, we probably have access to it. Only downside is I can't contract with any regional carriers who aren't contracted with Nationwide brokerage.

I dunno. I know folks here are pretty anti-captive, but it's a pretty good middle ground, IMO. I realize it can vary by state and might not be as ideal in other areas.