Career agents who work under the State Farm Insurance Cos. banner in Canada have given their firm the top rating, beating out five other groups in Investment Executive’s inaugural Insurance Advisors’ Report Card.
The report card, our first survey of the insurance distribution channel, asked 200 insurance advisors across Canada to rate their national offices or MGAs on delivery of support, products and services from 17 categories. We admit to comparing apples and oranges and even pineapples because our research covered career agents, such as those at State Farm and Clarica Life Insurance Co., as well as advisors who work under national MGA brands such as Equinox Financial Group, and a group of independent brokers. Career agents rated their companies, while Equinox brokers and the independent group rated their MGAs. All were asked the same questions.
What is clear from our sampling is that the 420 agents with State Farm in Alberta, Ontario and New Brunswick are the most satisfied with their firm of any group. Toronto-based State Farm topped the chart in eight categories including quality of product line, compensation and sales support. For the most part State Farm agents expressed satisfaction in all sections of the survey, with an IE composite score of 8.8 out of a possible 10. The composite score is an average of the 17 categories with the number of first-place scores factored in.
The Bloomington, Ill.-based insurer entered the Canadian market in 1938 as an auto insurer. At present, State Farm has $600 million in assets under administration, 70% of which is in automobile insurance, 23% in fire and 7% in life policies, with $25 million in mutual funds. Seventy per cent of its agents are mutual fund licenced. In December 2000, it inked a deal with AIM Funds Management Inc. for its agents to sell 11 AIM funds. Since then it has added three more AIM products to its roster.
Why are State Farm agents so pleased with their company? Miguel Remedios, agency resources manager, thinks it’s because of the community-based culture the firm promotes. He says finding agents that are community-minded themselves helps foster good relationships with clients.
“It’s like our new ad campaign: ‘We live where you live’,” he says. “We market only through our agents, we don’t have call centres and 90% of our clients prefer dealing with an agent.”
Another reason State Farm agents are generally happy, Remedios says, is because the company keeps them involved in corporate decisions. “Our agents are State Farm to us,” he says. “We want them involved because they help us make those decisions. We involve agents in task forces. I don’t know if they’re happy, but they’re involved.”
While State Farm agents had plenty of good things to say about the company, some also voiced complaints and pointed out areas for improvement. One area that needed work had to do with the branch manager — or as State Farm calls it, “the agency field office” — which provides support services to agents in the community. State Farm received the lowest mark of any company in that particular category: a dismal rating of 6.4, well below the industry average of 7.2. The comments make it clear it’s an area desperate for attention.
“Haven’t heard boo from him in a year,” says one Ontario-based advisor. Another State Farm agent asked, when prompted to rate his agency field office, “Is there a zero?”
Remedios says he doesn’t know why the company’s 10 field offices, which house two former agents, a technical support person and an administrative support person, scored so poorly. Other than that one category, State Farm is doing a bang-up job in the eyes of its agents. No other category received a rating lower than 7.8, while the firm’s overall rating and its ethics topped the charts with a 9.0 and 9.7, respectively.
State Farm’s underwriting policy system is causing a few headaches for its reps, who rated it a 7.8. “We’re struggling with our new system,” says an agent in Alberta. Another in Ontario says agents will just have to live with the system: “They’re doing what they have to do. Agents don’t like it but we understand it.”
The firm’s product availability also rated a 7.8, and an Ontario agent says: “We all want more, but I can understand why we have what we have.” Another says, “We’re getting there, but I’d rate it a six.”
Going forward, the company’s strategy is to solidify its foundation in mutual fund sales and car financing (a recent foray) before it expands its product line or agency distribution across the country.
On May 1, State Farm bought the Canadian subsidiary of VNB Financial Services, a car-financing company, that has assets of US$25.7 million, including a loan portfolio of US$24.1 million, and short-term debt of US$18.3 million. The two companies had been in a five-year partnership that allowed State Farm clients to acquire car loans through VNB, but according to Remedios, VNB no longer felt the alliance lucrative. State Farm purchased it to be able to continue to offer clients its financing services.
As for mutual funds, Remedios says, the introduction of mutual funds grew out of clients who wanted their State Farm agents to provide additional financial services. The company’s goal is to double its mutual fund assets by yearend, an ambitious goal considering Canadian investors pulled $1.2 billion out of safe-haven money market funds in June alone.
In meeting its goals, State Farm’s biggest battle is to foster more name recognition in Canada. Because of its U.S. roots, the company’s brand awareness hasn’t penetrated the masses. Remedios says the company needs more agents in the field and a fully national presence.
“It’s a challenge for us and a challenge for our agents as well,” he says. IE