This is an email from a District Manager that was recently terminated. The termination of Agents and District Managers has taken an accelerated pace in the fourth quarter of 2011.

Team,

As you all have been informed by the State Office, I have been let go without cause and will no longer be your District Manager. This was not a decision I saw coming from the Company and is certainly not my choice. Being your District Manager was a real pleasure. It was the highlight of my career. I am so fortunate to have had you all on my team. I probably was seen as a liability for the Company. Production is the only thing that is important. They say we are all Family, but those that have been with the Company for a long time can attest to the fact that we are not Family...it is all business. I believe by removing me they have positioned their finances better for their corporate interests. By removing DMs and Agents, the Company gains financially and can show their shareholders and Zurich that they are growing agencies and Districts but as one of my friends use to say...it is all just fuzzy math. I hope long term success for each of you and that the Company will not go after your agencies as they have stated they will be doing across the Country. They have also stated they will be lowering Agency commissions in the next year as well. I hope this does not happen as well as all of you have suffered enough financial hardships just keeping your Agencies afloat during this difficult economic cycle. I truly care for each of you and wish you all the most success possible. Good Luck and God Bless.

Thanks for everything,

XXXXXXXXXXXX

Comments:

If what he says is true and we have heard the same story from quite a few sources, this is troubling. Agents are already struggling with high rates and a bad economy and this would hurt all Agents. Let's take a moment and analyze the implications of such a situation, should it occur. AGENTS please understand that if FGI lowers the commission rate not only will you get paid less than the prevailing insurance industry rate, but your Contract Value will be lowered by the same percentage. But the plus side from Zurich's perspective is they will make approximately $300,000,000 more dollars annually from the Agents and also lower their Agent Contract Value liability. Now do you understand why Zurich is really considering lowering the commission rates?

Assume FGI, for no other reason than to feed Zurich more money forces the Agents to take a 02% commission reduction from 10% to 08%. Assume the average Agent makes Farmers $1,000,000 gross premium per year. At a 10% commission rate the Agent makes $100,000 for soliciting, servicing and maintaining the business and must pay himself, plus all operating expenses out of that $100,000, including advertising expenses. Farmers, on the other hand, makes $900,000 from the Agents hard work. But that is not enough, they lower the commission rate to 08%, so now that Agent must pay all expenses to operate his business out of $80,000 instead of $100,000. Now assume there are 15,000 Agents X $20,000, that is $300,000,000 more dollars for Zurich. This is pure and simple greed. There is no justification for lowering Agents' commissions. If it’s done under the pretext that if the Agent sells more life insurance, he will get the 10%. How about using a carrot and not a stick, pay bonuses for increased production, not destroy the base rate. There is no way the reduction in commissions can be justified other than corporate greed.  Hey Zurich, here's an idea, use some of those BILLIONS of dollars of management profit you make a year off Farmers Agents and use 02% of the gross to lower the premium rate. If you do that, production volume will go up; you will make your money back and more. A win win for everyone. You see it's not that Agents don't want to write business all day long, it's that Agents have competitors (Allstate, American Family, State Farm, Progressive, Geico, Nationwide, AAA, etc.) and they understand that consumers are price driven and they are capitalizing on the fact that Farmers is over priced in the market. Everyone knows this; it's all over the internet. Yeah Right, they’re not talking about commission cuts for their Agents, why are you?

UFAA National Board