February rate increase sign now

RE: Rate Increase and Several Changes effective February 01, 2008

To whom it may concern:

As we close the year 2007, we look back on a year of several challenges. We underwent a rate increase early in the year which caused several phone calls and quite a bit of work to retain clients. Many of us lost clients while others were able to retain.

Now we face a new challenge. How do we, as agents, overcome the upcoming February 01, 2008 challenge? We do not use the term challenge lightly.
On paper, we are convinced that this looks good from a corporate standpoint. Farmers Insurance is paying out $1.06 for every $1.00 we collect and something has to be done to reverse the trend. We agree that we should be at a profitable combined ratio, somewhere in the $0.95-$0.98 range.

In reality, this is not a good change. Coming from agents, who are the lifeblood link to our clients, we know that this will cause a severe problem. We have been taught to sell policies on value and discounts, and have done so up until this point. Some have actually been contrary to the customers best interest.

For instance, we have convinced several people who normally would pay in full to go on EFT to save money.

Now as the actuaries look at the loss trends of the EFT, they are looking at inaccurate numbers.

To the point: If Farmers Insurance truly believes that a rate increase is warranted, we will support it. However, we believe that the company should reconsider the EFT and Paid-In-Full discounts percentage change to the following:
EFT- 10\% across the board (in other words, status quo)

Paid-In-Full 10\% (minimum) across the board

In doing so we would simplify explaining the discount. Customers who are on EFT will still pay slightly more than customers who pay in full simply due to the EasyPay service charges.

We firmly believe that you will see a shift in the loss trends when there is a paid in full discount.

If there is no action taken, we will begin to see a decline in policies in force across the board. As costs rise, people shop.

It is not too late to make this change. To achieve market leadership by 2010, we, as agents, need to be competitive.


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Jason McintyreBy:
Entertainment and MediaIn:
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Austin Service Center

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