For the second year in a row, State Farm Insurance Cos. has taken top spot in Investment Executive‘s annual Insurance Advisors’ Report Card. The Toronto-based company scored an impressive combined rating of 8.2 out of 10, and ranked first in five of the 17 categories by which advisors were asked to judge their respective companies.
It’s clear from the State Farm advisors’ comments that they are largely a happy group. “I’m proud of our image,” gushed an Alberta agent when asked to rank the company’s image with the general public.
Happy would not be the adjective used to describe advisors at rival Clarica Financial Services Inc., however. Clarica finished in second place last year, but this year its advisors vented their displeasure about the takeover by Sun Life Financial Inc. in May 2002. Their anger sent Clarica right to last spot, behind four other national insurers with captive sales forces, a national MGA and a sampling of independent insurance advisors.
The Waterloo, Ont.-based company’s overall score nosedived to 7.0 from 8.2 a year ago. “It’s just not what it used to be,” laments a Clarica agent from the Prairies. Across the country, many of his colleagues agree. “Agents are not happy,” says an Ontario Clarica advisor. “It is a very unhappy workforce,” echoes a Nova Scotia agent.
But Clarica president Jack Garramone says the majority of agents are pleased with the service provided by the company. Each month, 300 agents from its 4,000-plus sales force complete an internal survey that rates different aspects of Clarica, and the results have been overwhelmingly positive, he says: “We are now at 90% in terms of agents who feel the service being delivered to them is very good or excellent.”
Satisfaction rates were not as high in IE‘s survey. Clarica lost points in all but one category, and that one was an unchanged score of 6.5 for underwriting policy and contract information systems. Significant losses occurred in the areas of strategic focus, compensation and freedom.
Strategic focus was Clarica’s single biggest point loss, down two full points to 6.4. Some agents say they are uncertain of the company’s focus. “We don’t know if we’re Sun Life or Clarica now,” says a Manitoba advisor. “I’m trying to figure their strategic focus out,” says an Ontario agent.
Garramone says the company’s focus is as clear as ever. “At a strategic level, our focus has not moved at all,” he says. “We believe in the strength of the full-time, professional advisor. And in the retail business, our focus is to build on that strength.”
Clarica’s scores for compensation and freedom were a weak 6.1 and 6.2, respectively, well below the industry averages of 7.2 and 8.1. Both categories drew contentious opinions.
“Clarica’s compensation is very confusing; you would have to be Albert Einstein to figure it out,” says one Nova Scotia agent. “It’s really hard to tell where my commissions are generated from,” says another Maritimer.
The confusion stems from Clarica’s unique compensation system, adopted in 1989, which pays level commissions for the life of the contract. Garramone says the system is advantageous to both clients and agents. “From a customer-service perspective, the agent is just as well compensated to serve the client 10 years down the road as they are on the day the policy is sold,” he explains. “For agents, you’re not starting from ground zero every January.”
Although the system provides long-term income security to reps, many Clarica agents told IE that level compensation restricts the freedom of rookie agents. “If you’re an older agent, you have freedom within the system,” says a Manitoba agent. “But I would hate to be a young person coming in.”
At least one Ontario rookie disagrees. “Level commissions are Clarica’s best aspect,” says the agent. “It forces accountability.”
Garramone, a former advisor, concedes the industry is a tough one to start out in, regardless of how reps are compensated. He also notes that under the level system new advisors receive additional commissions for the first five years of their careers.
One thing about which all Clarica agents do have nice things to say is the company’s client management technology. Although this year’s score fell to 8.0 from last year’s 8.7, Clarica agents remain enthusiastic. “Their technology is light years ahead of the others,” says a Nova Scotia advisor, noting a new client management system is on the way. Clarica’s score was tops amongst all companies surveyed, while its online support score of 8.0 tied for first place with State Farm.