Travelers Launching Low Cost, Segmented Product in New Personal Auto Strategy

By Young Ha | September 20, 2013

  • September 20, 2013 at 11:55 am
    lonestar says:
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    “There are certain large carriers that continue to pay base commissions that are lower. There are certain large carriers that will pay more,” he said. “We will fit in comfortably in the arena of compensation.”

    I don’t know which carriers he is referring to, but the only major carrier that pays less than 15% commission is Progressive. All my other companies pay 15%. Travelers will be paying 12% on the new auto product. So they feel like they need to make an extra 3% by withholding it from the arm that chooses to feed them(the agent), and at the same time they think it is a good idea to reduce the agent’s commssion by 20%? What am I missing here? They will have to fight a lot harder now, to earn business in my agency.

    • September 20, 2013 at 2:31 pm
      numbknuckles says:
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      I agree lonestar. By emulating the lower-paying carrier you mention, I fear Travelers has stepped out onto a slippery slope. This “progressive” step might simply take them closer to the true sentiment most well-stocked independants have toward the lower-paying carrier: carrier of last resort.

    • September 20, 2013 at 2:34 pm
      lonestar says:
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      I think it is pretty obvious that all the “thumbs down” dislike buttons are being clicked on by either Travelers employees or Travelers reps.

      • December 10, 2013 at 10:57 am
        Agent says:
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        I think it should be mandatory reading by all Travelers Reps and management to read these posts.

    • September 20, 2013 at 2:40 pm
      @LeadershipFail says:
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      They lay off 450 folks in this division, keep the same senior management that has failed time and time again, make decisions that are borderline…well, you get the picture.

      Yet, they are still collecting their huge bonuses and crying poor. Throw in the outrageous amount of cash that the CEO and the Board takes out of the company each and every year…yeah, they need that 3% badly to maintain their standard of living. Been doing it for years, why stop now?

      Funny thing is, they let go so many of the long-time employees last month that the brain drain is not measurable. If the major decisions are still being left to those same VPs and division heads without the sane “worker bees” to fix their delusions, you might as well brace yourself for the new gecko under a red umbrella logo…which, ironically, would pay them all handsomely when they get a 1-Exceeds Expectations rating on their “Leadership Fail” objective.

      If I was an Independent Agent, I would call a Big I and PIA meeting ASAP to figure out how to not sell their products until they do things they way you want them to. They only take these actions because they can…because you let them. Band up, be strong and force change in your marketplace. After all, they are spending a whole pile of money trying to figure out how to dump you and go direct!

      • September 23, 2013 at 10:31 am
        Agent says:
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        Isn’t it amazing that they managed to cough up $1.2 Billion to buy the Canadian company after they laid off the employees? They treat their US agents like this and expect us to like it.

    • September 20, 2013 at 3:16 pm
      Agent says:
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      We are supposed to see our Travelers Rep next week to go over this. Of course, we are in Texas and won’t be getting this new Auto product probably until next year. I am not a happy camper with taking another commission cut with them. They already cut commissions on stand alone HO which we couldn’t bundle because of their Auto rates. They already pay out commissions on a piecemeal basis when customers are on monthly pay. All the other carriers pay full commission when the policy is issued whether it is new or renewal. As a result of all their rate taking in the past 3 years, our formerly #1 Personal Lines carrier will be #3 shortly and headed downward. How can they think agents will like this approach? We do all their work for them and they think we should get by for less.

    • September 20, 2013 at 3:20 pm
      SWFL Agent says:
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      Say what you want about Progressive (that’s a debate for a different day) but I get the sense that Progressive has put some of that commission savings back into IS and product development. From an IS perspective, Travelers is nowhere near Progressive so cutting commissions will not be an easy sell. Travelers has just figured out that comparative raters and rate sensitivity are the industry norm while other carriers figured this out long ago. So my guess is that Travelers will figure out in about 2 or 3 years that agency software development and ease of use is important as well.

      • September 20, 2013 at 3:35 pm
        lonestar says:
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        Ultimately, the free market will dictate whether these changes are well received or rejected by those who do business with those companies such as Travelers that choose to reduce commissions.

        When writing business with Progressive, I have always been cognizant that I will earn 50% higher commission if I place the business elsewhere. Likewise, if I choose to write this new auto policy with Travelers I be forfeiting the ability to earn 25% higher commission were I to write it elsewhere (Travelers is choosing to earn 3% more, on the burden of their agents earning 20% less), and this reality will be weighed with every auto policy I write (as it has already been when considering writing thru Progressive).

        I have always maintained that I would write 3 to 4 times as many policies with Progressive, if they would simply choose to pay a “market” rate commission. I foresee the same scenario for Travelers.

        I feel certain that most of the agents will state our disapproval of the new commission structure to our Travelers reps. In turn, the reps will gaze at us with empty stares and bewilderment, as if we have enlightened upon them unforeseen knowledge never spoken to them before.

        Will all the other auto carriers follow Travelers lead? Only time will tell. Progressive went to 10% commission a decade ago, and the few that half followed Progressive with 12% commissions (GMAC and AIG both come to mind) fell by the wayside. Progressive has survived with their 10% commission on their ability to consistently provide a market for the substandard auto client. If Travelers wants to compete in this substandard market with the lower commission, I see a chance for them. Trying to compete for the preferred market auto policies with an inferior commission may prove more precarious.

        • September 20, 2013 at 4:08 pm
          Agent says:
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          Progressive is a necessary evil in our office and take things the others won’t. They also do business direct which is where their real volume is. We have a fair amount of business with them on various lines, but they have a high threshold on contingency so we just use them when we have to.
          Travelers thought 3 years ago they could just start bumping rates and the other standards would follow right along. Wrong! The others have taken some rate, but they never take as much as Travelers so they get the business most of the time.

  • September 20, 2013 at 2:04 pm
    smalltownagent says:
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    Echoing what lonestar has said. It is essentially a pay cut. Progressive is the only company of ours that pays 10%. Everybody else is 15%. Don’t think that won’t influence agents when looking at the top 3 carriers in price on their comparative rater.

    • September 21, 2013 at 10:58 am
      lonestar says:
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      smalltownagent, the other thing that I do on my Progressive renewals, since their commission is inferior to the going market level, is I actively quote them with my other companies at every renewal, looking for an opportunity to move them to a carrier that pays regular commission. So, companies that choose to pay a lower than market rate on commissions, will not only lose new business that they would have otherwise gotten, but also will lose more on renewal if the agent can move them to a better paying carrier. I have to assume that the majority of agents are not selling insurance for philanthropic reasons, and like myself, look at which companies reward me fairly for my choosing to place business with them. If an extra 3% is really what Travelers needs to keep to turn their ship around, (which equates to $15 for every $500 in premium) then the smart business decision would have been to instead charge $515 every 6 months for an auto policy instead of charging $500 and shafting the agent that provided Travelers with the privilege of receiving the business. Jay Fishman must be on his way out, as I do not seeing this decision to be a good one for Travelers long term.

  • September 20, 2013 at 2:22 pm
    Publicus says:
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    Reducing the agent’s commission means more money for the boys at the top. That is the American business model.

    • September 20, 2013 at 5:20 pm
      Agent says:
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      I am not sure that is the model for all companies. We have a very good relationship with all our markets. We can’t write or renew anything without them. Most markets want to write new business and gives us some tools to do it. Safeco is by far the most pro-active. They also fired the dude that was trying to institute Progressive like marketing, doing online sales etc. They decided going back to the Independent Agent was the right direction. Thank God they woke up before too much damage had been done.

  • September 20, 2013 at 2:30 pm
    BigD says:
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    When Travelers did their Teleconference call and spoke about the 12% commission there was a collective “click” hang up. Who needs that when other companies (as competitive or more competitive than TIC) are looking to write auto.

    This is not the old TIC we used to love and cherish. Fishman is getting to big for his britches!

    • September 23, 2013 at 10:24 am
      Agent says:
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      I didn’t get to hear the webinar, but I would have hung up as well. Travelers, particularly in the past three or four years have been very agent unfriendly. They don’t think there will be repercussions, but we will not place much business with them if this is what they are going to be doing. We have a living to make too.

  • September 20, 2013 at 3:44 pm
    CSP says:
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    Looks like Travelers is going to go barking up the same tree as Hartford. Hartford cut our commissions to 8%, they haven’t gotten a policy from our agency in years.

    Companies need to learn not to bite the hand that feeds them.

  • September 20, 2013 at 4:54 pm
    Cutting expenses says:
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    Saving $140MM? Is Fishman leaving?

  • September 20, 2013 at 5:49 pm
    LeadershipFail says:
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    They lay off 450 folks in this division, keep the same senior management that has failed time and time again, make decisions that are borderline…well, you get the picture.

    Yet, they are still collecting their huge bonuses and crying poor. Throw in the outrageous amount of cash that the CEO and the Board takes out of the company each and every year…yeah, they need that 3% badly to maintain their standard of living. Been doing it for years, why stop now?

    Funny thing is, they let go so many of the long-time employees last month that the brain drain is not measurable. If the major decisions are still being left to those same VPs and division heads without the sane “worker bees” to fix their delusions, you might as well brace yourself for the new gecko under a red umbrella logo…which, ironically, would pay them all handsomely when they get a 1-Exceeds Expectations rating on their “Leadership Fail” objective.

    If I was an Independent Agent, I would call a Big I and PIA meeting ASAP to figure out how to not sell their products in mass until they do things the way you want them to. They only take these actions because they can…because you let them. Band up, be strong and force change in your marketplace. After all, they are spending a whole pile of money trying to figure out how to dump you and go direct!

    I know from reading some earlier posts that individually some are doing just that, but to make any impact the actions have to large, loud and hurt the quarterly results…only done in mass as I know from my days as an insurance agency rep, the few that really do take action never put a dent in the machine. Good luck, I don’t envy a world where the product owners does everything in their power to destroy the sales outlets.

  • September 21, 2013 at 10:45 pm
    Agents of the Future says:
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    Hidden due to low comment rating. Click here to see.

    • September 22, 2013 at 8:56 pm
      numbknuckles says:
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      Hmmm…strangely ironic commentary, Agents of the Future, using “commiserate” when it appears the word you may have been looking for was “commensurate.” While assuming that it wasn’t purposeful, I can nonetheless appreciate the unintended meaning of commiserate, as in “Independent agents commiserate with one another on recent missteps of a once-dominant market participant.” As a full-service agent, it’s just not feasible to serve the value-driven consumer with a direct-channel mentality.

    • September 23, 2013 at 10:37 am
      NH Independent Agent says:
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      Agents of the Future – What reduction in acquisition & retention costs are you referring to? Regarding the growth in market share for the direct channel, the loser in market share has been the exclusive agent channel and not the IA channel. I applaud Travelers for lowering their internal expenses but the agent commission drop (similar to Progressive and the Hartford) will only hurt with growth with IA’s going forward.

  • September 23, 2013 at 10:32 am
    NH Independent Agent says:
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    It appears clear to me that Travelers is emulating Progressive in a few ways – cut commission and expenses to get to a low price point and become a multi-distribution carrier by selling througn IA’s and direct. However, I don’t believe Travelers is willing to play in the non-standard personal auto market with Progressive which will be one of the reasons this new strategy will backfire with IA’s. Progessive serves a purpose for many IA’s by being that highly automated efficent carrier that writes any personal auto you send at them. I suspect IA’s with large Travelers personal auto books will keep Travelers and use them defensively when none of their other markets can produce a price they need to sell an account. Subsequently, their personal lines books with Travelers will shrink. Additionally, I suspect IA’s with small Travelers personal lines books will probably cancel their contracts and move them to regional carriers who only sell through IA’s and pay market commissions (15% auto and 20% home). Travelers may make more money with this new approach but they won’t grow with the IA channel.

    • September 23, 2013 at 12:27 pm
      Agent says:
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      Travelers has always been known as wanting the cream of the crop business with high credit scores, no violations etc. I don’t think they will suddenly start underwriting like Progressive does. Accounts we have been doing with Progressive due to issues will not be acceptable to Travelers. I would be totally shocked to see Travelers win an account from Progressive in order to get 2% more commission.

  • September 23, 2013 at 2:14 pm
    lonestar says:
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    I see Progressive getting more business, since 2% commission difference is not enough to place with Travelers over Progressive. And, I see the other companies that pay 15% getting much more business now, since Travelers does will not be fitting in comfortably in the area of compensation, contray to what Jay “FISHY” Fishman says.

    • September 23, 2013 at 5:42 pm
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      If I had a customer with a Travelers HO and Auto with Progressive, I would consider bundling to Travelers to get the extra credits and the 2% extra commission, but I really don’t foresee Travelers getting in there and swinging on the Auto to beat Progressive. I had about a dozen stand alone HO with Travelers and I couldn’t bundle a one of them on the Auto. Quantum 2.0 may be better than the current Auto, but I am not going to hold my breath that they will be much better than they are currently.

      • September 23, 2013 at 8:22 pm
        numbknuckles says:
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        I agree Agent. That scenario could be beneficial to Travelers, especially now that the stand-alone Travelers HO commission has been cut by 1/3 (can you say “renege” on a decades-old contract?). But, as another option given the added competitiveness of the companion discounts, why not move both policies to another carrier paying market of 15%?

        Regarding the competitiveness of the new Auto product, I’m not holding my breath either. At least we know they’ll have a free 3% to play with on rate. I can only imagine the party the actuaries will throw.

        • September 24, 2013 at 12:05 pm
          Agent says:
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          We moved several of the stand alone HO policies to other carriers, but a few of them had to stay with Travelers due to issues with prior claims and the other carriers would either not write or were higher. Thank goodness, we don’t have many in that category. It is amazing how proud Travelers is of their Auto pricing. I had to move a loss free account for Home & Auto recently because they were double the going rate on the renewal. Safeco was glad to take the account off their hands. 3% on a $1,000 policy is still $30 or am I wrong?

  • September 23, 2013 at 8:54 pm
    SMCN says:
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    I earn 20% with a company that can beat any national carriers rate. It all comes down to good ole fashion underwriting.

  • September 24, 2013 at 2:41 pm
    Stand Up says:
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    Stand Up Together Independent Agents or fall alone. Don’t quote if you dont like the $$. All the carriers are watching this.

    If you keep Traveler’s on your comp raters some agents will eventually cave and issue. Then once this takes hold the other companies will follow and it will be less across the board.

    Stand up or you will finance the industry’s gains. They will take from the indep agent until the direct models take hold then the indep will be crushed.

    Stand up, stand firm and only quote a company you respect and that respects you.

    If you stand together the company will be forced to back down. If agents take it, it will take time but it will take hold.

    • September 24, 2013 at 4:26 pm
      Agent says:
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      What this has amounted to with our agency is that former #1 Travelers is now occupying #3 in the office and we continue to move accounts due to their pricing on both HO & Auto. It really hasn’t been that hard to move these accounts because they were high credit score and had few problems. If they want to underwrite their way out of our office, then that is the way it will be. We have to hang onto our customers or they will go elsewhere. By the way, they sure aren’t tooting their horn about their foray into direct quoting. I don’t think they have had much luck with that scenario.

  • September 25, 2013 at 9:46 am
    Agent says:
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    So now we know why they have been taking so much rate on Personal & Business the past 4 years. Pretty high overhead at home office I would say. Cut the Personal Lines dept to pay for the salary/bonuses,perks etc. Travelers is obviously a very large company with a lot of money or they couldn’t have bought the Canadian company for $1.2 Billion and Fishman wouldn’t be making this kind of money if he were posting losing numbers to the board. I just wish they would treat their agents better on our compensation and provide a more competitive product to sell.

  • September 25, 2013 at 5:27 pm
    No Doubt says:
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    When I started in the business, commissions had just been reduced from 20 to 17.5%. Agents complained but didn’t do anything. Then 15% started being the norm. Agents complained more, but carriers merged or were bought out so there were fewer choices for the agent, so they again buckled under.
    Travelers is now trying 10 and the others are watching closely to see what the fallout is. Unless Travelers loses a lot of business and not merely Auto, then expect others to follow suit pointing to “industry expense ratio pressures”.
    Best thing to do would be to avoind using Travelers for new business and actively remarket their business until they reverse this.
    It might be short term pain for agents but in the long run, all agents will be better off.

    • September 26, 2013 at 10:21 am
      Agent says:
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      We had our meeting with our marketing rep yesterday. She was singing the praises of the new Auto product rolling out. Of course, Texas doesn’t get it until February and she said the tests in smaller markets were yielding positive results. I wish I could believe all this since Travelers has been going steadily downhill in our agency for some time. The proof will be in the puddin when it does become available. She did admit that in her territory, Travelers is down in volume with all the agencies. She didn’t have all the details yet, but apparently there will be accident forgiveness, disappearing deductible offered as well as being more competitive with other carriers. She saved the best for last. New and renewal will be at 12% commission. I asked her if she thought agents would give them more business for a lesser commission and she looked like a deer in the headlights. We will not be selling much of this new product if we get a very similar premium from another carrier at 15%.

  • October 11, 2013 at 3:13 pm
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    Travelers was one of my top two for new business now they are not even going to be in the top three … Will use them like Progressive only when I have to!

  • December 10, 2013 at 4:00 am
    Call Center Agent says:
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    There are a lot of mixed feelings about Quantum 2 in our center. We have started to use it as a retention method for Quantum 1 and legacy clients, but rates have come back higher half of the time. If the client has been with us 5+ years in Quantum 1 they have earned accident forgiveness. In Quantum 2 this is something the client has to buy in a “package” if they want it now. We have also introduced decreasing deductible, not to be confused with Allstate’s vanishing deductible. The new discounts such as good payer, eft, and continues coverage are all smoke and mirrors. In some cases the rates from Quantum 1 to 2 have been in upwards of $500 more per year. If you want to call it a perk, in Quantum 2 Travelers has gotten on the boat with a separate glass deductible of $50 you can purchase so windshield replacement doesn’t fall under the comp deductible anymore. This is the new coverage a la carte. Quantum 2 is still way too new and different for Travelers to be releasing especially after the recent announcement of two call centers closing, one in New York and in Texas. The worst part is not once did anyone tell us our independent agents would be taking a commission cut……the agents that keep me employed.

  • January 15, 2014 at 12:57 pm
    lonestar says:
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    Well, I had a meeting with my Travelers rep recently. They are spouting the company line, such as “The new auto product WILL be successfull…” and the impression is the agents “WILL sell it regardless of commission or else…”
    Hmmm. Let me correct you Mr./ Mrs. Travelers rep. I DON’T HAVE to sell your product at all, for lower commission. Travelers will have to be the lowest rate by $200 or more / 6 months before I will offer your product. Jay Fishman and company got too greedy. I am ready to roll my book if I have to.

    Now, come back and visit me again once you pay a market rate of 15% commission again, then we’ll talk about presenting your product to the public again.

    • February 14, 2014 at 6:29 pm
      Agent says:
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      They promised Quantum 2.0 to Texas by 2-16 with training on 2-4-14. Oops! No dice. They will get back to us is all they say. I don’t have a warm fuzzy feeling.

      • February 17, 2014 at 11:41 am
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        New bulletin from Travelers on the Quantum rollout for Texas. They now promise March 16th since they say they have their filings approved with TDI. If they are approved, why not March 1st? They are slow as a slug to implement programs.



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