State Farm changes pay for 19,000 agents, causing reduction for many

State Farm has made changes to its compensation and benefit package for 19,000 agents, with some saying it will “substantially reduce their earnings,” an NPR affiliate is reporting.  

WGLT also reports that State Farm is cutting its benefits for retired insurance agents. The radio station is based in Bloomington, Illinois, where the insurance company’s home office resides. 

The article notes that State Farm mentioned changes last month at a convention and sent a pre-recorded video and email to WGLT Monday. 

As the company moves to a single-style contract, in place of the several types it currently has, base commission compensation could fall 35-40% for some agents, WGLT reports, basing the reporting on conversations with agents. 

State Farm disputed the reduction percentage to WGLT. 

“These changes enable agents to grow and help more customers,” State Farm told WGLT. 

The insurance company also told WGLT that agents have a choice to sign the new contract. It added that agents who do not sign the new contract can apply for a benefit that may be provided. 

“Contracts and expectations with independent agents will include a compensation structure that will continue to incentivize agent engagement to serve the expanding needs of our customers. One consistent compensation structure across agents provides clarity and gives State Farm flexibility to adapt as customer needs evolve — while supporting the entrepreneurial opportunity of independent business ownership,” State Farm told WGLT. 

The company will end payments under the Annual Investment Payment Program (AIPP), a deferred compensation and retirement enhancement that offers rewards to agents for long-term production and retention of a book of business, WGLT says. 

State Farm also will no longer offer health insurance to agents and their spouses, the company told WGLT. This includes benefits for retired agents, such as a Medicare supplement of $2,400 per year per person, up to $4,800. 

A spokesman told the radio station that their focus remains on human-plus-digital interaction. 

State Farm CEO Jon Farney recently described the insurance company’s transformation into “A Next Gen Good Neighbor” in a blog post. 

“Next Gen Good Neighbor” is faster and tech-enabled, while staying true to the company’s values, he writes. He said this means fewer steps for customers, faster answers, and more competitive steps through digital tools that reduce paperwork and speed up updates.  

A press release that followed the blog post describes the transition in more detail. 

It talks about faster, simpler claims service, more competitive pricing, and data-driven underwriting. It calls the approach “Human + Digital.” 

The release states that State Farm is making the end-to-end claims process faster, from first notice of loss to payment delivered. 

The collision industry has been vocal in recent months about changes it has seen from State Farm, including moving to centralized auto claim audit teams and cutting labor rates. 

Last month, Michael Bradshaw, vice president of K&M Collision in Hickory, voiced concerns about State Farm during a Society of Collision Repair Specialists (SCRS) open board meeting and Collision Industry Conference meeting.  

He described how centralized internal review teams have been removing operations that State Farm appraisers have identified. He added that the operations are removed without discussion with the body shop or any proper documentation or explanation. 

Changes made to the estimate are completed by nameless individuals on the review team, he said. 

“In fact, the names of those individuals are specifically excluded from the claim file for this purpose because they don’t want to be identified,” Bradshaw said. 

The changes come as the insurer has lost its position as No. 1 in auto insurance market share, which it has held since World War II. S&P reported earlier this month that Progressive has moved into the No. 1 position based on private direct premiums for the trailing 12-month period ending March 31. 

WGLT also was the first media source to report that State Farm notified employees of a voluntary exit program in September. 

P&C Specialist notes that the last time State Farm initiated a similar program was in 2017, when it reorganized parts of its information technology division.

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