Declaration of independents

At Farmers, independent agents are welcomed, valued, and supported

By Elisabeth Boone, CPCU

What happens when a giant exclusive agency company opens its doors to independent agents?

“The Farmers/Foremost organization has the opportunity to maximize the penetration of all our products in the independent agency network.”

—Jack Hannigan


In 1999, when Farmers Insurance Group began to manage the East Coast personal lines business of Zurich Insurance, the country’s third largest auto and homeowners insurer also became a major player in the independent agency system. Before becoming part of Zurich Financial Services Group, Farmers did not have a presence on the eastern seaboard. Today the insurer’s products are sold in 12 eastern states (see box on page 38) by some 1,100 independent agents, who enjoy strong local support for marketing, underwriting, and claims handling. In 2000, Farmers acquired Foremost Insurance, the leading writer of mobile home and recreational vehicle insurance, in a move that both enhanced Farmers’ product portfolio and strengthened its ties to independent agents.

Carriers’ use of multiple distribution channels is no longer a rarity. Each company, however, approaches the issue from its own unique perspective, and the Farmers model offers valuable insights into the process of diversified distribution.

Across the country, Farmers/Foremost maintains relationships with some 40,000 independent agents and is represented by about 15,000 exclusive agents, according to Jack Hannigan, who is chief marketing officer for independent agency operations. Hannigan began his career with CIGNA and in 1983 joined Foremost Insurance, where he held a succession of top executive positions.

In total, some 55,000 agents sell Foremost products, while 1,100 independent agents sell Farmers’ personal auto and homeowners coverages and about 100 agents offer small commercial products in the carrier’s 12-state East Coast territory. “Part of our strategy is to continue to roll out Farmers’ products to our independent agents in the East with whom we have relationships through Foremost,” Hannigan says.

Although Foremost maintains its own identity in the Farmers/Foremost partnership, “in mid-2003 we began to merge the Foremost marketing group and the Farmers independent agency marketing group in the East. That allows us to take advantage of economies of scale and to share technologies,” Hannigan notes. “We want to bring the independent agent a broad portfolio of Farmers and Foremost products that includes auto, home, specialty, and commercial coverages from one organization. Our goal is to penetrate all of the personal and commercial lines market segments in which Farmers and Foremost offer products. We think bringing together the specialty products of Foremost and the Farmers standard lines products is a great value for the independent agent.”

Some carriers that use multiple distribution channels have increased their market penetration—but have done so at the expense of their relationships with independent agents who resent being forced to compete with exclusive agents, banks, and Internet direct marketing operations. Hannigan is quick to emphasize that there is no conflict between Farmers’ exclusive agents and the independent agents who represent the company on the East Coast. Independent agents are active only in states where Farmers has no exclusive agents. As a result, Hannigan points out, the organization is able to build market share by drawing on the strengths of both kinds of agents without pitting them against each other.

Value of independent agents

By building a strong independent agency network, Hannigan observes, Farmers is responding to the desire of most consumers to work with an agent who offers a full menu of product choices. According to research, he notes, eight out of 10 people want to buy their insurance from a local adviser. “We want to sell insurance in the way the consumer wants to buy it,” he asserts.

“The Farmers/Foremost organization has the opportunity to maximize the penetration of all our products in the independent agency network,” says Hannigan. “The Farmers organization currently writes about $400 million of auto and homeowners volume through independent agents, and our presence in the eastern states offers us the opportunity to grow that business.”

In addition to growth, Hannigan remarks, “Working with independent agents and having to compete against very strong players in that marketplace helps us develop our technologies and helps us understand the kinds of services and processes that make a company stronger. The value that independent agents bring to the marketplace and to the consumer is important, and we want to be part of it.”

On the technology side, Hannigan says, “we have begun to invest heavily in our Web-enabled front-end processing systems so we can compete on the same level as the other strong carriers that our independent agents represent.” Based on both in-house and outside research, Hannigan remarks, “We know that agents obviously are looking for stability in companies, and they’re also looking for technology and customer services. We think that by blending our organizations and making major investments in technology to support our independent agents, we can become their carrier of choice.”

Over the next 18 months, Hannigan says, Farmers plans to expand its East Coast independent agency force by some 2,000 agents. The carrier seeks relationships with agents who are experienced and have a growing book of business in personal and commercial lines. “We want them to be marketing oriented and technologically savvy so they can interface with us through the Web,” Hannigan says. “For the agents with whom we already have established relationships, we’re looking to give them access to more of our products.”

Throughout its East Coast territory, Farmers maintains a field marketing force to support its independent agents. Agency operations in each state are overseen by a Zone Executive Director. A service operation for Farmers business is based in Baltimore, and Foremost service operations are located in Foremost’s home city of Grand Rapids, Michigan, as well as Baltimore and Kansas City. Branch claims operations are located throughout the East Coast territory. “We have a full set of marketing, underwriting, claims, and customer service capabilities for our agents,” Hannigan declares. What’s more, he continues, “Our research tells us that agents want companies to offer a solid compensation package. We believe our compensation packages across the board are very competitive.”

Kudos from agents

What are independent agents saying about their partnership with Farmers? “The feedback we get deals with issues like brand identification,” Hannigan responds. “The Farmers and Foremost brands are very well known. When long-time Farmers customers from Midwestern and western states move to the East Coast, they want to know how they can get Farmers products,” he says. “Our name brand is a major benefit for the independent agents who represent us in the eastern states. Our ability to deliver a full range of products is another benefit our agents appreciate. We believe we can offer almost all of our agents a marketplace for well over 80% of the business they write.”

Another key issue for agents is stability. “Both the Foremost and Farmers organizations have been in their respective businesses, and are mainstays in those businesses, for many years: Farmers for 77 years and Foremost for 53 years,” Hannigan remarks. “We’re starting now to get feedback on the services we provide as our technology and delivery systems become increasingly state of the art,” he continues. “Those are the factors we hear about from our agents when they tell us why they want to do business with us. Many agents tell us they are trying to streamline their operations by consolidating company representation, and the fact that we offer easy access to a variety of products is very attractive to them.”

Farmers independent representation

In addition to its Foremost Insurance Company products, Farmers Insurance sells personal auto and homeowners insurance through approximately 1,100 independent agents and small commercial business through approximately 100 independent agents in the following states:

New Hampshire
New York
North Carolina

Looking ahead, Farmers is considering expansion of its independent agency network into additional states, including New Jersey and South Carolina, where no exclusive agents are located. Adding more states, however, isn’t the company’s primary objective in building its independent agency presence. “We see so much opportunity in the states we are in. We haven’t yet maximized our agency penetration with our full product line, and that’s where we’re going to focus our efforts,” Hannigan says.

Asked to characterize the key challenges and opportunities his organization faces over the next few years, Hannigan says, “This is a very competitive market, and our challenge is to determine how to compete effectively with the best companies in the independent agency channel. Another challenge is to maximize our technological capabilities to give agents the kinds of systems that will help differentiate us in their minds. We need to continue to develop our technology so we can become a major player,” he remarks.

Hannigan points to something he considers to be a critical factor in Farmers’ success, as well as its ability to differentiate itself in the market. “In each of the markets we make available to independent agents—personal auto, homeowners, mobile homes, motorcycles, marine, recreational vehicles, and small commercial—we’ve built the organization so that we have specialized expertise in each of those markets in terms of products, marketing, systems, and claims,” Hannigan says. “We’re structured in such a way that we can maximize the strengths of bringing Farmers and Foremost together. I think that has positioned us not only to grow our business, but also to grow it profitably.”

In the insurance business, as in every other field of endeavor, people make mistakes. The key is to learn from those mistakes and make changes to get back on track for success. “We entered the independent agency market with the Farmers product in late 1999 and early 2000,” Hannigan says, “and in 2002 and 2003 we had to put a moratorium on new business because we made some mistakes in the way we launched the program. Many agents questioned our staying power and our ability to withstand some of the pressures in the market. We’ve told our agents that if we weren’t a stable organization, we wouldn’t have been able to stay in the market during those times of challenge. Because our organization is strong, we were able to learn where we were making mistakes,” Hannigan says. “We’ve corrected those mistakes and are making the investments we need to be successful. We think the strength and stability of Farmers and Foremost are important to agents, and their feedback tells us that is the case.” *

For more information:
Farmers Insurance Group
Web site:
Phone: (800) 237-6136