These Travelers stories never mention that they cut commissions to their agents.
Well, you are missing the point though – at least we (agents) should feel good that we “helped” Travelers beat Wall Street’s estimates!
I am sure you do when you get the profit sharing at the end of the year.
But that wouldn’t impact this years results – that takes effect in 2013
And I am sure no other carriers are doing this? I can name you at least 5-6 that are doing the same.
This article is really off the wall. Our agency has a large book of personal lines business with Travelers and we are rewriting their accounts left and right due to substantial rate increases on their homeowners product. It’s difficult to convince a client that a $400 to $800 rate increase is acceptable and other markets have not increased their rates to the same extent.
One thing you fail to realize Banana is that Travelers is mainly a commercial lines carrier.
Also, Travelers is a market leader and tends to act before anyone else. But don’t you worry, the rest will follow – as they always do.
(guess where I work, hehe)
Good for you Random, I am sure you are smiling. Guess what though, so is Allied, Safeco and others after all the business we internally rewrote from you to them because quite frankly, I can’t justify to my clients an 18% rate increase on a “perfect” risk. Oh, of course, let’s not forget the cut in commissions which is a separate story for another day.
You are right Banana. We have had Travelers for Personal & Business. They have been #1 in our office for the past 5 years up until 12-31-12 and have now fallen to second and are barely ahead of my third market. This is due to incessant rate taking that cannot be sold so we have to move the business or lose it. Their Marketing rep says they are positioning themselves for growth in 2013 which is another way of saying they expect the market to catch up on the rate taking. It never quite does so they continue to lose business. I suppose they like writing fewer accounts and hoping the customer doesn’t mind paying more for the brand.
Sell on price, lose on price….
So please Matthew, teach us, pretend I am a client who has excellent credit, no tixs or accidents, no lifestyle changes, and my policy just increased $628 for no obvious reasons and you’re trying to convince me to stay with the incumbent carrier.
(Oh boy, can’t wait for this!)
Ok so you are telling me that the product that cost 500 bucks in 2011 now costs 1000 in 2013. You know why? Cost of labor goes up, material costs go up, everything goes up, who gets the cost tranfer? you guessed we do. Wake up, gas went up from 1.40 a gallon to almost 4 a gallon, mile is almost 4 bucks a gallon. It happens in every industry.
EXACTLY!! I don’t know what numbers they are looking at but our book has taken a serious hit when it comes to retention. An unsubstantiated $30-$50 monthly rate increase does not bode well in this market, especially since insurers spent billions last year encouraging insureds to shop and switch. You don’t even need to know your VINs to shop these days. It’s ridiculous. And to the comments above about profit sharing…if retention isn’t good, you don’t profit share.
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Another way to look at this is that Travelers previously could have been so underpriced that taking 8% or 10% increases on renewals still leaves them below market pricing thus the high renewal retention rate…just saying.
We’re moving most of our Travelers commercial lines accounts becuase of pricing. We’re seeing 15%+ increases in pricing, not 8%.
I have seen $700 increases on a $1,000 homeowners policy. This mind you is on a client who hasn’t even had any losses. Try to explain that to a client with a straight face.
Yes, we are moving Travelers personal lines business left and right to other carriers. Also, Travelers is no longer one of our darling companies, especially after they cut commissions.
Yes, Lonestar, not only have they cut commissions, but are running off their monoline HO business. We have tried to bundle some of them, but their Auto pricing is out of line, so we have to move these monoline policies or take a commission cut with higher premiums. We have also complained for years about how they pay commissions. If an account is on EFT or monthly direct bill, they pay the commissions out monthly for renewals on the statement. All our other companies pay full commission when the policy renews. I don’t know about you, but I want my full commission at one time, not 1/12th of it. They are the most unfriendly company to agents that I represent. The contingency sucks compared to the other companies as well. We have received some in past years, but based on volume and Loss Ratio, we could have done much better with Safeco or one of the others on the same figures.
They had to restructure their contingency model after client #9 screwed up all the larger carriers with his lawsuit in New York. They used to have a decent program before he got involved.
The rate increases needed to happen. Investment returns are at an all time low and CATs are at an all time high. There are mounds of evidence that support the increases.
I have received numerous agency complaints about the rate increases mainly because they don’t know how to sell rate. Honestly I don’t blame agents that much because they have been used to rate decreases every year for almost 8 years.
Although the good agents, who know how to sell and explain things to their insureds, have told me how much they appreciate that we are raising rates. Not only is it good for the carriers (and the industry as a whole), but it increases agency commission as well (I have also seen numerous agencies close down over the past few years, due to diminishing commissions).
What is funny though, on the majority of my policies that have been in force for more than 5 years, even with the rate increases, the premium is still less than it was 5 years ago.
At some point action needed to be taken to stop the trend.
Rate increases are hard to sell I’ll give you that.
(As far as cut commissions. Some earn their commissions, some don’t. But that’s a whole different topic)
Random, You are sitting up there in your ivory tower without ever looking at a customer eyeball to eyeball and trying to explain a non justified rate increase on a loss free customer. By the way, when we move a customer due to these rate increases, we replace it with equal or better coverage than Travelers provided so we are not just selling a better price. We let the Allstate boys do that with inadequate coverage and just selling a price. We have to earn our commissions every day of the week. We actually have increased our commissions since we don’t have to wait all year to get them on renewals like Travelers pays. If all our companies paid us like Travelers does, we would have to reduce staff due to inadequate cash flow. I am sure Travelers likes the system since they can hold that money back and get interest on it.
Losses are not always the best indication of rate adequacy.
Carriers have millions of years of policy data. We can predict better than an agency (or smaller carrier) how a risk will perform. Insurance 101 – law of large numbers comes to mind. So yes, although a policy may be loss free, that doesn’t generally indicate it will be loss free next year or the year after that(there is more involved).
Agent, you said, “By the way, when we move a customer due to these rate increases, we replace it with equal or better coverage than Travelers provided so we are not just selling a better price.”
I’m sure there are circumstances where another carrier has better coverages and forms than Travelers (that’s a given; some carriers are better at writing different segments than others), but I know (for a fact) that is not always the case. Specifically for the kind of business I write, that is rarely the case. This is a blanket statement and I don’t think it has any merit.
Since I’m not a sales rep and don’t know the intricate details of other carriers commission schedules and profit sharing programs, I won’t comment too much on this one. All I know is that these programs vary in their benefits to the agent (but it depends on the agency size, production, retention, and so on). You cannot say a blanket statement that one carrier has better payout than another (that may be true for you, but not for everyone).
I can empathize with the difficulty in selling rate increases (I used to be on the agency side) – and there are circumstances where moving a policy makes sense (maybe same or better coverage at a lower price with another carrier). However a really good agent can sell past that. Yeah, another carrier might have the same coverage and lower pricing now – but what about next year or the year after that? How strong is this carrier compared to others financially? Did they take TARP money? Are they moving in and out of markets? What other benefits do they have (like risk control)? How was the insured’s claim experience with the carrier? ETC…
Insureds generally do not understand our industry and it is up to you to inform them.
Rate increases needed to happen, they are good for you, me, and the insured (at least in the long run).
Random, not sure about you, but it appears to me you’re not gaining a lot of fans here. Just saying.
There’s no doubt that all agents can do a better job explaining the features & benefits of particular carriers over others. It’s not always price but when large price variances occur, which is not uncommon, the customer does not understand it. And why should they. All of us know in this business that when a company prices a risk that is vastly different than the marketplace, the company either made a pricing mistake or they don’t want the risk. The companies call it “segmentation” and the customer calls it “nonsense”.
Random, all of your points have validity but let’s be honest. Travelers knows what they’re doing with their pricing and they want the client at their rate or not at all.
You are right SWFL. And we expected a lot of push back when rates were increased (because no one else was doing it). At some point it needed to happen. I can’t stress that enough. Travelers just so happened to be first out of the gate.
Looking back at 2012 – yeah Travelers was the lone ranger. But now, the story is much different. Most other carriers have followed suit – I have seen some take twice as much rate.
I know I’m not gaining a lot of fans here – mainly because the majority of readers are agents but everything I am saying isn’t new information (and I seriously doubt you are just hearing it from only one company.
How we make profit has shifted. Before we could run at a combined ratio (not including investment income) of 105% and still make a decent profit. But since investment income is way down, we have to make profit a different way – underwriting (which includes bring policies up to adequate rate levels). The margins for insurance companies aren’t probably as much as you think.
Keep in mind that this article is based on looking back at 2012 and fourth quarter. Retention may be different in first quarter 2013 as some of you are suggesting.
Random, I don’t know how long you have been with Travelers, but they have been taking rate since 2009. I remember having one of their managers from Home Office and a regional manager in my office back then and we showed them a number of quotes comparing them to our other markets to show them how far off they were. They agreed with us and promised to take a look at their rates. Two months later, another round of rate taking was announced. I might as well have been talking to my brick wall in my office. What a waste of my time! I will agree that they are usually the first to take rate among the Independent Agency markets, but they have seriously misjudged thinking the others would fall right in line. The others that take rate always seem to be 5-10% less on the rate taking so Travelers remains the highest. They are just shooting themselves in the foot and are losing business as a result.
I am not sure how much you understand the dynamics on the carrier side. Managers, even Regional Managers, have little to no say in rates. That comes down to actuaries, product managers and executives. They can make recommendations and provide the agents’ point of view, but that is all. I am sure they probably looked at the rates and voiced your opinion, it is just that their perspective is near the bottom of consideration regarding rates.
I’m just commenting so I can track responses to this story. Fun and interesting reading.
Random your whole story about being first out of the gate is bologna. At least in Texas, everyone was increasing at about the same time and amounts, except Travelers was just a little bit more. Your premise that the market will catch up is a false hope. Because when the rest of the market increases, Travelers will just increase again and still be higher. The auto rates aren’t great, and the commercial rates are really really bad. I can offer Hartford, Liberty, CNA and those are all well respected name brands at a better price. Hell, even Allstate uses ISO forms on commercial now, and they have better rates, too. And, you can’t say the coverage isn’t as good because ISO is ISO. The sheer fact of the matter is that “rates needed to go up” to make some people in Minneapolis and Connecticut quite a bit more wealthy.
Mark, I am in Texas as well. We have enough issues being a weather state and the highest prices in the country for HO. Travelers just takes the rate taking to a new level. I recently wrote a new client who moved here from Indiana. He said his HO there was about half of our Texas policy premium on a similar value. I had to patiently explain to him about Wind & Hail exposure and he accepted that. By the way, we didn’t write him with Travelers because they were 20% higher on the Home & Auto.
Looks like a Texas thing then. Travelers doesn’t do a whole lot in Texas. Sorry didn’t know that before. I was referring to the country as a whole.
Travelers biggest problem is that they have gone the way of Hartford and to some extent CNA. They employe underwriters that have one or two products that they handle and know nothing about. They ignore email and phone calls for days, sometimes weeks. They are a bunch of people that don’t know much about insurance other than to spell it. No one follows through, they don’t read our change requests which are so specific because we know some nitwit is reading it at the other end that has a list of questions that you answer on the request but they delay the process by asking the questions that have already been answered. I could go on for an hour here. They don’t underwrite a risk, they have a list of things they can do and they don’t understand that list either. Their Technology dept is the only dept that I work with that has a work ethic and knowledge. Audit dept took 3 months and several emails to respond on an audit problem. Had to get managers involved to get them to respond. We don’t have people to correspond with in some depts we have an email address or a fax number.
By the way, 6 years ago Travelers was one of my favorite companies.
As I see it Random, you are like the typical company person who never has to deal with a customer and try to explain to him about market changes and rate increases. We, as Independent Agents have to do it every day of the week. I am having to re-market a Travelers account as we speak who has been with Travelers about 10 years. They received an $800 increase on the Homeowners with only a minimal increase in value on the dwelling. The customer said they liked Travelers, but the increase was way too much. We can sell small incremental increases, but 20+% will not retain good customers. No wonder our Travelers volume has fell steadily in the past 3 years.
Random: How did you get so underpriced that you need to be taking 20% – 25% rate increases on so many accounts? Doesn’t sound like great underwriting to me.
I recall Travelers posting combined ratios in the low 90s throughout the soft market. Was that accounting hocus pocus or what? Should we be expecting you to take large reserve increases like AIG?
Hey Random, Can you tell me what 100% of 0 is? Companies can take all the rate they want and if they succeed in running off the business, they have much less premium to pay overhead with. We protect our renewals because we don’t have an income without customers and we worked too hard to see it go out the back door. My Travelers volume is off $200,000 over three years just because of what has been going on. I didn’t ask for them to do these things, but I have to move it or lose it.
J.S. you’re right, we (being carriers) submitted to the market place instead of doing what’s right (over the past decade). We should have been releasing quotes at higher rates – but instead, here we are.
When the majority of agents only sell the lowest price, it is hard to compete. And when investment income wasn’t enough to supplement drops in rate, action needed to be taken (I’m feeling like a broken record at this point).
Insurance, to my knowledge, is one of the only industries where prices decreased every year. Really, does that make any sense?
Hi Random. Sounds like Travelers is a follower, not a leader.
Yes, it is hard to compete. I don’t understand companies that fight for market share when prices are depressed and then pull out of markets when pricing recovers. Seems backward but there is a long history of companies doing exactly that.
But remember, companies that don’t follow the market like sheep actually do better both with respect to growth and profitability over time. Check out Wards.
And how do you explain the wonderful combined ratios leading to a need to take action? There seems to be a disconnect unless reserves were allowed to suffer in the name of quarterly earnings reviews.
Of course they sell on price. The value is in the independent agent themselves, not the companies per se. People value the relationship of the independent agent, not the insurance company. People who value the relationship with their insurance company have State Farm, Allstate, Farmers, Nationwide, Etc. So, if you want insureds to value Travelers and not have to worry about agents moving business, I suggest moving to exclusive carrier contracts and going after a different demographic. The loyalty that independent agency companies need to worry about is that of their agents, NOT their customers (as much). When you alienate an independent agent, you will always lose business, much the same as when State Farm alienates a customer. Just ask Encompass about this – yes I know it’s Allstate, but their business has been in decline for years because they didn’t have the knowledge to create loyal independent agents. It’s the opposite with Progressive – give agents an easy product to write at a fairly decent price and you’ll grow. Progressive isn’t really always the best price, but their user interface is really easy so they get a ton of business. See how this works?
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