Farmers Turns to Independent Agents in Eastern States Only
By Sky Barnhart

The president of Farmers Insurance Eastern Operations doesn't want independent agents on the West Coast to get their hopes up.

Just because 400 East Coast agents have it made, due to Framers' new expansion campaign utilizing independent agents, it doesn't mean the movement will spread beyond 12 eastern states, said Ed Orodeckis.

Farmers is dropping its eastern direct response campaign, launched one year ago, as "truly a gesture of good faith," according to Orodeckis.

"Farmers did away with the direct piece as a demonstration of its commitment to the independent agency group in those eastern states," he said. " The agents are very excited, mainly because Farmers has tremendous franchise value. Farmers brings stability to the personal lines market forum on the East Coast. All the agency companies are always switching, and their prioities tend to be predominantly commercial. In this case we are strictly personal lines, which is great.

The new program will stay on the East Coast in order to avoid a conflict of interests - those are the states in which Farmers is not already established. ("Can you imagine going in to try to push independent agents at the same time you're running a direct operation?" Orodeckis said.) The 12 states involved, are Maine, New Hampshire, Vermont, Connecticut, New York, Pennsylvania, Maryland, North Carolina, Mississippi, Louisiana, Kentucky and Georgia. In those 12 states, Farmers has 400 independent agents associated with Zurich Personal Insurance to get the ball rolling. Orodeckis said the number of agents is expected to grow to 1.000 within the next three years.

"Farmers is so big in the 29 states they are in, they want to use independent agents to penetrate the other states," Orodeckis said. "They like our strategy and it works."

The new program went into effect following the completion of the merger between Farmers Group Inc.'s parent B.A.T. Industries p.l.c. and Zurich Insurance Group in September 1998. Zurich designated Farmers to run its personal lines in the U.S., and all of Zurich Personal Insurance (ZPI) is steadily becoming Farmers in a transition, taking place over a period of months in 1998-1999.

The states are converting to the Farmers platform in systems - the first two states, Maryland and Pennsylvania, are scheduled to go up on the Farmers system in February and the other states will follow. Orodeckis said that no decisions upon further expansion will be made until the designated 12 states have been established..

However, Farmers will not sit back and wait for business; rather, it will immediately launch an aggressive marketing strategy.

"We want to be the predominant writer, we want to be the number one agency company," Orodeckis said. "Our strategy is to provide the full services that Farmers provide the full services that Farmers provides through their network to the independent agents. We intend to be very competitive and take advantage of our cost structure, and reflect that in our competitive rates.

"We want the agents to grow market share as well. We intend in the beginning to go after books of business for rollovers, and that would give us critical mass. It would allow us to hit the road fast, and become a total mass marketer and draw new customers to the independent agent. That's the key: you want your agent to grow."

Orodeckis said that Farmers will use its brand name to back huge national and local advertising campaigns. "We're going to be ahead of the game when it comes to independent agents versus the standard agency companies that are out there."

Reprinted from the Insurance Journal of The West, December 28, 1998