By Cyril Tuohy
Farm Bureau Financial Services, a long-time provider of insurance and financial services to agricultural and rural markets, is revamping its exclusive agency distribution network to focus on agent retention and training, the company said.
The key for Farm Bureau is to find ways to tamp down on attrition by retaining the many new agents who joined the company in recent years and to strengthen its recruiting process to orient the company for growth, a company executive said.
“It will be challenging to grow the agency system with new attrition rates we've had,” Scott Stice, the new chief marketing officer of FBL Financial Group, said in an interview with InsuranceNewsNet. FBL Financial Group is the holding company of which Farm Bureau Life Insurance Co. is a subsidiary.
FBFS is the brand under which the agency force operates to sell products and services underwritten by Farm Bureau Life Insurance.
The company’s four-year agency force retention rate last year in the 14 states where it does business was approximately 28 percent, according to company filings. The rate is still higher than that shown in a recent LIMRA study that revealed only 19 percent of men and only 15 percent of women agents make it to their fifth year in the business.
Much of the “churn” has come from the urban markets, not the rural and agricultural markets where the company has traditionally been strong. Chief executive officer James P. Brannen, in a conference call with analysts earlier this year, blamed the agency force’s compensation structure for the turnover.
FBFS’ agency force has dropped to 3,552 agents, agency managers and sales and service associates in the second quarter of this year from a peak agency force of 4,038 in 2009, according to company data. However, collected premium per agent climbed to roughly $375,000 from the $300,00 in collected premium per agent in 2009.
Stice said that while some companies look to squeeze more premium out of every agent as the agency force shrinks, that is not the goal of FBFS. The company, he said, wants to increase the agency force and raise the amount of premium collected per agent. “We want to pull both growth levers,” he said.
FBFS has not set a specific goal to meet with regard to agency force expansion. The issue for FBFS is one of retention, not one of setting a specific number and then reaching it. Particularly in an era when the total number of life insurance agents in the U.S. is on the decline, it doesn’t make much sense to set a “hard” goal, Stice said.
The size of the markets in the company’s 14-state market area will determine how many agents FBFS eventually will need, he said.
Of the total agency force of 3,552, there are 1,793 exclusive Farm Bureau agents and agency managers supported by 1,759 sales and services associates, the company said. The agents target Middle America, a segment of the marketplace dominated by a thrifty, conservative consumer in rural, agricultural and small and midsize metropolitan markets.
Stice, a former agent who was previously a senior manager with Farmers Insurance Group, which also distributes through an exclusive agency force, said that shopping habits of customers have changed. In addition, the economics of running a profitable agency have also become more challenging and getting an agency up and running is more expensive than it used to be.
FBFS looks for people who are “not necessarily in the job market,” Stice added. “We look for people who don’t know they are looking for a career change,” he said. “It’s a great small business opportunity.”
From agencies staffed by one or two people, to agencies employing scores of agents and support staff, there is a lot of opportunity for entrepreneurial agents – and some risk too. Mindful of the need to help new agents start their business, FBFS looks to provide financing for new agencies until the agent is ready to fly on his or her own.
Stice said FBFS has changed its financing model for the way the company helps agents build their book of business. He declined to be more specific. “At end of day, they have to be able to run the business and see a financial upside during and when they leave financing. We do believe that we've got the right model.”
Of course, the company, as well as the aspiring producer, wants to know earlier rather than later whether an agent will be able to survive. If not, both sides part ways with no hard feelings.
It’s not a business model adopted by every insurer by any means, but it’s one that has worked for FBFS for many years and the company has no intention of altering it, Stice said. This is especially true as surveys show that consumers like buying insurance and financial services from an agent, and with internal data that shows the company has very high cross-sell rates.
Yes, the industry “has evolved some” in that shopping and quoting can be done online, but “the death of the exclusive agency channel is exaggerated,” Stice said. “Agents are still very much a large part of the future, provided that we’re delivering the services that customers want.”
Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. He can be reached at [email protected].
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