Don't be a Farmers Insurance Agent: Advice from an ex-agent of Farmers Insurance Group

In the Beginning
In November of 2004, I was lured into being a Farmers Insurance agent by a District Manager in Scottsdale, Arizona known as Bob Ratkovich. At the time I was making a salary in excess of $50,000 a year in the IT industry as a Server Administrator for a local web hosting company. Promises of 6 digit incomes within 3-5 years baited me in!

The first few interviews were filled with pictures painted by my interviewers of unlimited income potential with a minimal investment to get my new "small business opportunity" off the ground of only $5,000. The beginning would be the hardest part, but untold fortunes await me in being an Insurance Agent with Farmers. Several pieces of literature were handed to me as well as visual breakdowns of projected income for the next 1-5 years. The first 6 months I would see a net loss from expenses but thereafter when renewals started to kick in, i would start to see a profit.

So I was all gung-ho and started to study on my Property and Casualty/Life and Health licenses for the state. After 2 weeks of work, I made it through the tests and was scheduled to start my "Reserve Agent Program" on 2-1-2005. This was of course 1.5 months away, so I decided to start attending their weekly meetings in January 2005 so I could get a head start.

I learned a few things about insurance in January and was feeling pretty comfortable with the product knowledge before starting my actual reserve program in February 2005. I started selling policies to my friends and family first. Sometimes it was cheaper, sometimes it was more but because they trusted me they signed up regardless of the cost.

By March I lead the district in life sales and was at least top 1 or 2 in home new policy sales. This continued for several months through the end of my reserve program in October of 2005. By then I qualified for the Toppers Club and earned 2 Blue Vases. Less than 50% of the other agents were able to even get 1 Blue Vase so I was feeling pretty good about myself.

Life Insurance?
One thing started to become very obvious. The only thing the DM and Farmers really cared about was how many life policies agents sold. We get an average of 10 emails a day and have 1 weekly, 1 monthly and 1 quarterly meeting as well as state and district wide meetings in between. I felt as if I was wasting 40% of my time in required Farmers meetings. The major underlying point of every meeting was to sell more life.

By December of 2005 I started to research other insurance companies and also started looking into being independent. This is when everything started to go south. I started going back over everything that had happened up to this point and noticed a lot of things that bothered me:

The actual payout of a life policy is only about 1%. This meant that this policy had an extremely high profit margin.
Home rates started to go south in April of 2005 and were becomming increasingly harder to sell.
Farmers had changed its rating structure behind the scenes several different times in the last 6 months and only once had they advertised it to the agents.
The Farmers billing system is completely illogical and infuriated most customers, about 1 in 5 quit within the first 3 months of their policy because they, I or Farmers could adequately explain to them why the first 3 months of their bill could not be predicted and drained their accounts.
Many statements made by the District Manager had conjured facts. One major one for example is that I had spent $25,000 of my own money so far and was still not turning a profit even though I was easily exceeding their required numbers.

Being a Captive Agent Sucks
I learned of a couple of incidents that really troubled me. First was the big battle in Texas with Farmers and their Department of Insurance over mold claims. Farmers essentially pulled out of the home insurance market for almost a year. This left all the agents in Texas with no product. I had also heard from a couple different sources while talking to clients that there was a downsizing period a few years back in Arizona were their policy was not renewed. The second one was a little more tough to substantiate but it sparked concern that if Farmers were to quit writing Auto or Home, I as an agent would be stuck in a very difficult position.

Due to my grand performance in 2005, I was awarded some policy transfers from some agents that were retiring. One of which I later found had a really bad relationship with the DM and before exiting and managed to call all of the clients and tell them they were getting this one specific agent who was his office mate. This created confusion among my new clients, some of which decided to either quit Farmers completely or look for the closest agent to their house. The problem this caused me is that in agreeing to accept these clients, I also agreed to accept the full chargeback of premium if the client decided to cancel. In January of 2006, I saw 30 of these clients quit. This cost me quite a bit of money seeing as how the commission I earned was at a 50% rate of normal, but when they leave I get charged back the full amount. In effect it actually cost me money to take on these client transfers! Over the next few months things were not looking much better on those client transfers. Overall I never made anything on those policies and spent a great deal of time servicing them. I knew from then on it would be easier for me to just find new clients than to service transfers at a discount rate.

The Farmers Way
I started to look around at the other agents. The existing older agents all seemed to despise the DM, very few of them had a good relationship with him and I have a feeling the ones that I thought were, only seemed like that on the outside. I also saw a few agents quit that started about the same time I did. The DM never had anything good to say about anyone that left. This concerned me. What if I ever needed a reference? It would be impossible to get a favorable one from this guy.

The more I learned about Farmers and the more emails I got and meetings I went to, I grew more and more tired of hearing about life insurance. I literally did not want to sell it anymore. After checking into rates with other companies and finding out the product I was selling, cost on average 2x more than any other company, I no longer wanted to even think about life insurance. I looked at every agent around me and saw one thing we all had in common, each of us had about 3 policies on ourselves, and 1 on each of our closest family members. My son wasnt even a month old before I had 2 on him! It really seemed like this whole program wasnt about us being successful as an agent. it was about an agent coming onboard, writing everybody close to them for life insurance and being forced out of the program because they couldnt make the life requirements anymore.

The real picture started to be come clear. Farmers real marketing plan is on the order of a Multi-Level Marketing Scheme. They find and recruit as many people as possible to sell to their immediate friends and family then wash out of the program so they can transfer those policies to the agents who can actually put up with the torture. Farmers Insurance Group District Managers specifically seek out people with absolutely no experience in the insurance industry so they can fill them with their own ways of doing things. They also do everything they can to trash talk every other company and brainwash you into thinking they have the best program. I dont know how many times I heard that I was getting paid the best commission rate available. I'll tell you this, I'm independant now and I know for a fact the commissions I recieved with Farmers are as little as 1/2 as much as I make from other companies!

What really sucks about life insurance is we only got a payout when it first started and nothing afterwards, even though the company was still being paid for it and we still had to service the policy. Even worse, if an agent quits, their life policy goes to another agent who will never get paid for servicing it!

Nobody Does it Better?
By March of 2006, I started hearing about programs that other insurance companies offered their new agents. One gave a 70% commission structure on all new business, were talking 70% of total premium for the first policy period. Our favorite company paid 1/10th of that for auto. Another company started you out on a salary with an office, an existing book of business with about 1000 clients and staff who were already trained. The list goes on, but as a result I became completely discouraged by the Farmers program and started to become more depressed and stressed out by it.

I began looking for a way out. My first official year as a career agent was now up and I had to exit my small desk in the corner of the district office that I had been paying $500/month for. You are allowed to stay for your 3 months in reserve and 12 months as a career agent. I found an open spot closer to my home sharing an office with 2 other agents. One has been with Farmers for about 20 years and the other started at the same time as me in the same district. My monthly expense for just the office increased to $900. Under this arrangement, we were able to get a short term 6 month sublease with an agent that was moving out. I'm extremely lucky that I didnt get locked in to a 3 year lease for that office.

My training had told me all the long to cultivate relationships with people who are "centers of influence". Those being real estate agents, mortgage brokers, title companies and such. My new office had 6 different mortgage companies, 2 title agencies and 1 real estate agency. Me and the other two Farmers Agents that shared the office went around to each one and bought all of them lunch one day to let us know we were there. The reaction kept getting was lukewarm at best and that we were with Farmers seemed to always come with an eye roll. Any time I visited a networking group or spoke to either other Insurance Professionals or Real Estate Professionals, the response was strikingly similar and I knew exactly why.

Farmers has a target market:

Over 30
Needs Home, Auto and Life
Good Credit AND only finances something every 5 years
No tickets/accidents
Likes high deductibles
Makes no claims
Doesnt use Glass Coverage

I can write an article about each of these criteria and probably will as this site progresses along. But I can fully back up every one of these as fact. The problem I'm getting at here is this ideal person is on average 1 in 50 people. Even if a mortgage broker is kind enough to give you a try, they will never call you again if you come back with a rate of $2000/year on a 1300 sq ft home. It makes no difference what your reason is. People that fit the above criteria always walk into the deal with an insurance company picked out ahead of time. You have to have a very personal relationship with the broker for them to want to talk this person into trying you. Its very hard to build this relationship with someone you dont know if you cant work any magic on rates. Believe me, regardless of claims, service and every other detail, 80% of the people who use insurance are sensitive to the rate.

Starting to look even more bleak
Things went severely downhill over the summer of 2006. I became more depressed about my situation. I also saw my bank account start to approach $0. I was out of money to keep this proposition going. After investing $40,000 into my "Small Business", my Contract Value or amount that I would be paid for my book of business was worth a small fraction of a yearly commission rate. I had 270 clients at the time and exiting my contract would yield $3400. As an independent agent, you would have over $200,000 in written premium and depending on what mix of clients you have, this book would be worth about $20-30k or possibly even more. With the Farmers you own nothing except for the debt you incur trying to make the system work. You will walk away with what they call a Contract Value that will yeild you a small fraction of what you would get if you actually owned your book of business.

One more even bigger thing loomed. Part of the Career program paid me what they call a "subsidy". Its essentially a loan based on new business premium. I had accumulated $22,000 of it. Under the program, you complete 2 years of career program and over the following 3 years you can have 1/3 of it waived each year. So in essence you cannot break even on the Farmers Agent program until the 5th year. I had dumped every bit of the $22,000 back into my so called agency that I found really wasnt anything that I owned. I really only owned debt and sweat equity that couldnt be cashed in.

Having more problems dealing with things, I started to pull away from the system. I could no longer bring myself to attend the "sell more life" pep rallies. My office lease was to be up at the end of September 2006. Every month you have an Agency Review meeting with the District Mangaer to discuss your progress. The DM started threatening to have my contract cancelled with every meeting and conversation. He even told me that I was putting his "childerens future in jepardy", due to my lack of life sales.

Contract Termination
By the end of the summer I was at wits end and on the verge of breakdown. I decided that I had to eliminate this burdon from my life. The DM called complaining about numbers again and gave me an ultimatum. I decided I was no longer going to listen to it anymore and let him follow through with it. They cancelled my Farmers Contract.

I immediately stopped getting renewal checks unlike another agent I know that quit months before and received his for 3 months after he resigned. I also got a letter settling up the affairs and demanding payment of $10,600 in subsidy. Apparently the DM has to pay 1/2 of it, but he lied so much about everything I dont even know if that was true or not. He was really more interested in pushing me out of the program than keeping me in so he didnt have to pay it so I tend to believe he wasnt responsible for anything. The bad part is, the due date was 10 days from when I got the letter and my bank account officially hit $0 the month before.

Here we are, November 2006 and I'm starting all over with an Independent agency this time. No longer an owner of a small business. Completely out of money. I owe my previous employer $10,600 and cant pay it. The only good thing I have left in this world is a good credit rating and within 2 months that will be gone.

I cant think of any situation where it would be better to be a captive agent with Farmers than to just be completely independent. Heck, I would have been better off if I just took a job at Mc Donalds Drive through. At least they would have paid me and I could have quit without owing anything. Very expensive lesson learned.

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