Documents
Resources
Learning Center
Upload
Plans & pricing Sign in
Sign Out

New car insurance fort worth

VIEWS: 13 PAGES: 28

  • pg 1
									                   A publication of the United Farmers Agents Association
The

Voice
                                                               Spring ’02




  Are you ready for
National Convention?!
             June 25 - 27, Las Vegas                                     pages 4-5




   The United Farmers Agents Association is a professional association
         committed to helping our members through education,
                                                                           FARME R S




                                                                                                       C I ATION




       communication, support and information and to establishing
                                                                                 A
                                                                                                  SO




               a true partnership with Farmers Group, Inc.                             G EN
                                                                                              TS A S
                                               UNITED FARMERS AGENTS ASSOCIATION
FARME R S




                            C I ATION
                                             8978 Watson Road, Suite C • St. Louis, MO 63119
                                                   314-729-0727 • FAX 314-729-0598
      A                SO
            G EN
                   TS A S                                                                           RALPH BUCHANAN
                                                                                                          PRESIDENT


 Dear Member,

     On Jan. 4, I sent out the first edition of UFAADirect of the year. Because many of you haven't supplied UFAA
 with your e-mail address, we are reprinting it here. (To begin receiving your personal copy of UFAADirect, send an
 e-mail to ufaa@aol.com. Include your name for our records.)
      Twenty-five plus years as an agent. Twenty-five plus years making money to support my wife and two kids. But
 all things must come to an end. As I said at the UFAA convention in June, I would be leaving the agency force, but
 I was going to do it my way. I did Presidents Council, numerous Topper Clubs, Life and Commercial Masters and
 other assorted goodies along the way. Those things were fun but not as important as spending time with my wife
 and family. So I spent time with them.
     The last few years have been interesting. I got sued for telling the truth (The suit was dropped). The state
 executive visited me and incorrectly accused me of three things, all reported by an anonymous person (Can you
 say coward?). I suffered through an office invasion that lasted from July through the retirement last February of
 Doug Powell (a former state executive), an "investigation" that was never closed. Quite an interesting time in which
 we (UFAA) learned a great deal (I'll tell you more about that at a later time.).
      I think what bothered the management company most is that I never cowered in front of them when they did
 their intimidation routine. I learned to say "No" to my DM many years ago and have been trying to teach others to
 do it ever since. It's hard to say it the first time, but by the time you get to the 10th time, it becomes very easy. I felt
 I was an independent businessman and therefore not subject to the many requests and demands placed on the
 agency force for no real or apparent reason. Because of that, the DM stopped inviting my wife and me to his annu-
 al Christmas party (Can you say "lack of class"?). If that is the price of independence, I'll take it every day.
     On Dec. 31, I celebrated my last day as a Farmers agent. I have been legally blind for several years and finally
 got around to applying for disability. My request was granted quickly (Legally blind appears to make the request a
 slam-dunk.) and have retired.
      I will continue as president of UFAA until my term is up in June and elections are held. I will continue to write
 these informative little communiqués as close to weekly as possible. So please continue to e-mail, fax, and mail
 anything you find that needs to appear in print. It's been great, and I thank all of you who have been so supportive
 in the past. Indeed, I really did it my way!
      So what have I been doing since? Ken Unrein, a former Farmers agent also, and I have spent numerous hours
 calling, e-mailing, and seeing state senators and representatives about credit scoring and the inherent problems.
 UFAA business has increased substantially, and it's extremely pleasing to stay as busy as I am.
     My travel schedule is picking up, with a trip to Las Vegas and Palm Springs in February, a trip to Washington,
 DC, in March, a trip to Dallas in April, a trip with my son in June to Boston and New York to see the World
 Champion Arizona Diamondbacks play in Fenway Park and Yankee Stadium (maybe the best trip of all), and of
 course the UFAA National Convention, June 25-27. And you thought retirement had to include hobbies and golf!
     My new numbers are 888-765-4649 for those of you who are out of state and 480-855-7387 for the locals. My
 fax number is 480-726-2515.
              Give me a call sometime! I’m just "sitting around."


                                                                                  Have a great day!,




                                                                                  Ralph Buchanan, National President
                                                                                  United Farmers Agents Association
                                                                                                                 Coming
The



                                                                         FARME R S




                                                                                                     C I ATION
                                                                               A
                                                                                                                 events




                                                                                                SO
Voice
                                                                                     G EN
                                                                                            TS A S



                                                                                                                 JUNE
                                                                                                                 Summer issue of The Voice
                                                                                                                 mailed to the agency force.
                                                                                                                 23 National Board meeting,
                                                                                                                 Chapter Presidents arrive,
                                                                                                                 hospitality room, Luxor Hotel,
                                                                                                                 Las Vegas
                                                          Spring ’02                                             24 Chapter Presidents
FEATURES                                                                                                         meeting, delegates arrive, hos-
                                                                                                                 pitality room, Luxor Hotel, Las
                                                                                                                 Vegas
Risk spreading? Or cherry picking?
                                                                                                                 25-27 2002 National
Using credit history to make insurance decisions                                                 6               Convention, Luxor Hotel, Las
                                                                                                                 Vegas
Allegations of fraud
Former FBI agent testifies about Allstate credit scoring                                8-9
                                                                                                                 Help wanted
Alive and well                                                                                                       Farmers agents are fighting
                                                                                                                 back!! We are taking strong action
Updating the Texas class action lawsuit on AA bonuses                                         13                 to correct inequities in the current
                                                                                                                 captive agency scheme.
                                                                                                                     In conjunction with our CEAA
Ethical behavior                                                                                                 counterparts, we are asking UFAA
A call to arms for all involved                                                               15                 members to write their legislators
                                                                                                                 and make phone calls when pro-
                                                                                                                 agent legislation is on the agenda
Keeping you informed                                                                                             in your state legislature.
Are you receiving the UFAADirect e-mail?                                                      18                     We must have your help, your
                                                                                                                 eyes, your ears, and your support
                                                                                                                 in order to make positive progress.
                                                                                                                     If you are aware of pending
COLUMNS                                                                                                          insurance legislation in your state,
                                                                                                                 please forward the information to
                                                                                                                 govaffairs@ufaa.com. Thank you.
Membership
Don’t wait until tomorrow!                                                                    12                 Elections!
                                                                                                                      At the National Convention in
Legal Activities                                                                                                 June, National Board elections will
Waiting for a DRA hearing date                                                                16                 be held for President, Secretary,
                                                                                                                 Director of Media Relations,
                                                                                                                 Director of Legal Affairs, and Board
       The Voice is published four times per year by The United Farmers Agents                                   Director at Large. It's an honor and
Association, a professional association committed to helping our members through                                 privilege to serve the Association,
education, communication, support and information and to establishing a true partnership                         but it’s also work. Who you would
with Farmers Group, Inc. The content of The Voice is the responsibility of the elected                           like to see on your National Board?
National Board Members who comprise The Voice Committee. Products and services                                        For more information, contact
advertised are not endorsed by The United Farmers Agents Association, Inc. or its
affiliates. Complaints or inquiries should be forwarded directly to the advertiser. All
                                                                                                                 the UFAA National Office or one of
purchases are at the complete discretion of the customer.                                                        the current National Board mem-
                                                                                                                 bers.

                                                  The Voice • 3 • Spring ’02
Simply wonderful!
Join us for the 35th National Convention
— it’s sure to be a most memorable event!
By Don Green                             with rental car companies should               We also will have the ever-pop-
     UFAA will be celebrating its 35th   you wish to explore further afield. A    ular workshops. We have lined up
anniversary this year at the 2002        jaunt to Lake Mead and Hoover            one on technology with Steve Todd,
UFAA National Convention, to be          Dam is definitely an experience          one on legal issues with attorneys,
held in Las Vegas, June 25 - 27. We      worth the trip. The Fremont Street       and one on Workers Compensation
have a wonderful event planned for       Experience is another feature sen-       with Bob Jasak. Further workshops
you!                                     sation. This is a pedestrian prome-      are still under construction but
     We will again return to the Luxor   nade under a five-block canopy with      should be finalized soon. Tuesday
Hotel and Casino, 3900 Las Vegas         more than two million lights and         evening is open for you to enjoy Las
Blvd. South, located near the infa-      540,000 watts of sound, showing          Vegas on your own.
mous "four corners" area of the          nightly from dusk to midnight. If the          The National Convention contin-
Strip where the MGM Grand, the           opportunity arises, make a trip          ues Wednesday, June 26, with reg-
Tropicana, the Excalibur, and New        downtown to see this light and           istration at 8 am. A cocktail recep-
York, New York, are located.             sound show.                              tion is set for 6 pm, with the annual
     The remarkable Luxor has a               If wildlife attractions interest    banquet at 7 pm. A variety entertain-
unique pyramid design reaching 350       you, there are several to choose         er for the evening is being explored,
feet high, with the brightest beam of    from. Look for the Dolphin Habitat at    but at the very least you should
light in the world. The hotel boasts     the Mirage, the Shark Reef at            expect a wide range of music, cho-
several amenities, including more        Mandalay Bay, the Lion Habitat at        sen just for you to dance, relax,
than 4,400 guest rooms and dining        MGM Grand, and the Flaming               mingle with others, and enjoy the
experiences ranging from magnifi-        Habitat at the Flamingo to name a        festivities.
cently elegant to a less formal food     few. There are just too many tours             The business meeting continues
court. It also has four large pools,     and exhibits to list, so be sure to      Thursday, June 27, with registration
Jacuzzis, a full service spa and         check out the Las Vegas web site.        at 8 am and should conclude
health center, valet and self-service         The National Convention starts      around noon. Elections are antici-
parking, and the obvious gaming          Tuesday, June 25, and concludes          pated for that day.
services. Its convention space is        Thursday, June 27. The National                Per the bylaws, one half of the
conveniently located in the west         Board will arrive Saturday, June 22,     National Board positions are elected
towers.                                  and meet Sunday, June 23.                on even-numbered years and the
     A wide variety of entertainment           The Chapter Presidents arrive      other half are elected on odd-num-
is available at the Luxor. Some of       Sunday, June 23, attend a hospitali-     bered years. This year, the positions
these include the Games of the           ty event Sunday evening, and meet        to be elected are the President,
Gods Arcade, King Tut Museum, the        Monday, June 24. Delegates and           Secretary, Director of Media
Giza Galleria, and the Pharaoh's         attendees arrive Monday, June 24,        Relations, Director of Legal
Pavilion, located one level above        and register from 3 pm to 10 pm in       Activities, and Director at Large.
the casino, which is the gateway to      the hospitality room where vendor              One of the most positive rea-
the world’s largest atrium and where     exhibits will be located.                sons for attending UFAA's National
you can enjoy shopping, dining,               The National Convention ses-        Convention is stated by our slogan:
rides, and attractions. The Blue Man     sions begin Tuesday, June 25, with       "Agents helping Agents." So make
Group is also located at the Luxor,      an opening breakfast at 7 am, regis-     plans to attend now and don't miss
featuring musical instruments            tration at 8 am, and the meeting fol-    out on this exciting event.
including back pack tubulums, air-       lowing.                                        Please complete the registration
poles, and the three-story-high drum          The Convention Committee has        form on the opposite page and send
wall. The Blue Man Group currently       suggested the feature topic "Top         it, along with your check, to UFAA,
appears nightly at 7 pm and 10 pm.       Agents" so UFAA is researching           8978 Watson Rd Suite C, St. Louis,
The actual schedule can be con-          speaker possibilities. We are looking    MO 63119. You also can fax your
firmed when we are closer to the         at top-producing agents who could        credit card authorization to 314-729-
event date.                              give ideas about staffing, sales tech-   0598.
     Other Las Vegas shows and           niques, what has worked, what has              I am looking forward to making
features can be explored by visiting     not, etc. We have several we are         this a memorable National Conven-
www.lasvegas.com. Once again,            speaking with and are attempting to      tion for one and all.
UFAA has arranged agreements             confirm presentations.                         See you there!

                                              The Voice • 4 • Spring ’02
       UNITED FARMERS AGENTS ASSOCIATION, INC.
              2002 NATIONAL CONVENTION
                       JUNE 25-27
                                        Registration form due May 15, 2001

______________________________________________________________                              ____________________
Name                                                                                        Chapter Number

_____________________________________________________________________________________
Address

_______________________                  _______________________                       ________________________
Telephone                                Fax                                           E-mail

[ ] Yes, I will attend the 2002 Convention.                     [ ] Yes, I am a delegate.

[ ] Yes, I am a member or an alternate delegate.                [ ] Yes, I will bring the following guest(s):


______________________________________________________________
Name

______________________________________________________________
Name

I/we will arrive on _______________________ and depart on _______________________

Schedule
June 22      National Board arrives.
June 23      National Board meeting, and Chapter Presidents arrive. Hospitality starting at 6 pm.
June 24      Chapter Presidents meeting at 8:30 am, and Delegates arrive. Hospitality starting at 3 pm.
June 25      National Convention Opening Breakfast begins at 7 am. National Convention begins at 8:30 am.
June 26      National Convention begins at 8:30 am. Cocktails at 6 pm. Banquet at 7 pm.
June 27      National Convention begins at 8:30 am, continues until noon.

Reservations must be made by each individual on or before May 15, 2002, at the Luxor! Call the Luxor at
1-800-288-1000. Please be sure to mention you are attending the UFAA Convention in order for us to get credit for
your reservation. We have financial commitments and need your help with this! Delegates will be reimbursed to the Chapter
at $32.15 per night only for those staying at the Luxor and only for the Convention dates.

Registration fees for the 2002 National Convention are $130 for delegate/attendee, $70 for spouse/guest, $30 per child,
if registration is received on or before May 15, 2002; $170 for delegate/attendee, $95 for spouse/guest, $40 per child
if registration is received after May 15, 2002. This registration will generate an identity badge. Badges must be worn to
gain access for the hospitalities, the opening breakfast, and the banquet. Absolute final registration with the National Office
is June 5, 2002. There can be no exceptions granted. Please check the appropriate box(es) below and enclose your check,
payable to UFAA, or you may use your Visa or MasterCard.

                            By May 15th           After May 15th
[ ] Delegate/Agent             $130                     $170                  $ _______________

[ ] Spouse/guest                 $ 70                   $ 95                  $ _______________

[ ] Child                        $ 30                   $ 40                  $ _______________

Total enclosed or authorized                                                  $ _______________

__________________________________                  ________________          $ _______________
Visa or Mastercard                                  Expiration date            Amount Authorized

______________________________________________________________
Authorized Signature
Risk spreading?
Or cherry picking?
Should companies be allowed to make underwriting or
rating decisions solely on the basis of consumer credit history?
By Ken Unrein                            Without the ability to use credit his-      neous 70% of the time.
     The use of credit reports, credit   tory as a tool, they would have had               I am concerned with the fact
histories, and scoring models in the     to reject the risk.                         that some companies have taken
insurance underwriting and rating              In theory, this is a very reason-     the concept of insurance score
processes has grown exponentially        able and responsible use of credit          underwriting and now using it as a
over the last few years. There is        history as an underwriting tool.            rate making tool.
increasing concern that this may         Credit history used in conjunction                 With the insurance score sys-
have a negative impact on con-           with the traditional underwriting tools     tem, the insurance company can
sumers' ability to access and main-      to better place customers is a good         change the rates and circumvent
tain personal automobile and resi-       thing. I assume some companies              the rate filing laws by simply chang-
dential property insurance at appro-     are using credit scoring in this man-       ing the factors (which are currently
priate rate levels.                      ner, but they must be in the minority.      considered proprietary and trade
     My purpose here is not to try to    I do not personally know of any             secrets) in their insurance score
persuade you to ban the use of           companies that are.                         model. This would then allow fewer
credit/insurance scoring. I am here            The insurance industry should         clients to qualify for the insurance
to persuade you to enact legislation     be allowed to use insurance scoring         score required to entitle them to dis-
that will require the insurance indus-   in their underwriting decisions.            counts against the unrealistically
try to provide full and complete dis-    However, to avoid misuse of the             high base rate that has been filed
closure to the consumer when credit      tool, it must be regulated. The             with the regulatory agency. Thus the
history is used in determining the       industry should not be allowed to           company has been able to increase
insurance premium he/she will pay.       abandon the traditional underwriting        their rates without having to file new
      It is not in the public's best     tools and replace them with insur-          rates with the Department of
interest to charge a higher rate or      ance score underwriting.                    Insurance.
disallow discounts on insurance pre-           We can obtain a five-year dri-              Should companies be allowed
miums without full and complete dis-     ving record and a five-year claims          to make underwriting or rating deci-
closure. The secretive nature of the     history report. The stability factors of    sions solely on the basis of credit? I
current use of credit underwriting is    residence and employment can be             do not believe they should.
unjust and would never be allowed        easily verified. With this information,           Companies should use tradition-
in any other industry that uses credit   we have a very good picture of the          al underwriting tools as a primary
information to qualify consumers.        prospective customer's driving              tool and use credit as a secondary
     Since 1993, the industry has        habits and propensity for losses.           tool to to qualify a risk that would
been replacing the traditional under-          Fair Isaac & Co., the leading         not qualify under their traditional
writing method with insurance score      score model provider, states that           underwriting tools.
underwriting. The industry has sold      their model presents the consumer's               If companies were allowed to
this concept to insurance regulators     profile as a snapshot. That is to say,      make underwriting or rating deci-
and state legislators, claiming that     it is a reflection of an instant in time.   sions solely on the basis of credit,
allowing them to use credit as an              The question before us is:            would the insurance principle of risk
underwriting tool would help them        Should a five-year or longer verifi-        spreading be abandoned? Would
provide customers with lower rates       able history of the consumer's dri-         the selection of risk now become a
than they could relying solely on tra-   ving and claims history be more             new insurance principle of cherry
ditional underwriting tools.             important than a snapshot of an             picking that would replace risk
     They have told us that if the       instant in time?                            selection? I believe it would.
client could not qualify for their             I can tell you from experience              It is in the public's best interest
insurance program, due to an acci-       that the insurance industry has             to prohibit consumer credit informa-
dent on their driving record for         abandoned the principals of tradi-          tion from being the sole reason for a
example, but had an excellent credit     tional underwriting and have                consumer being denied insurance,
history, they could make an excep-       replaced it with a snapshot in time,        being placed in a particular rating
tion to their no accident requirement    which was developed from informa-           tier, or being charged a higher pre-
and accept the client as an insured.     tion that has been shown to be erro-        mium rate.

                                              The Voice • 6 • Spring ’02
Scoring models
Can the abuse be controlled?
By Ken Unrein                            or unknown amount owed on                fault of their own, lost their job due
      Insurance score models were        accounts (Is that the fault of the       to the 9-11 terrorist attack or any
first implemented in 1993. Some are      consumer or the reporting entity?),      other economic event now required
designed by independent modeling         date of last credit check too recent     to pay more for their insurance
companies, others by the insurance       or unknown, and unfavorable num-         because they were late making their
companies.                               ber of active accounts with balances     utility payments?
      Models may be used by numer-       (too few or too many, which is it?).           Does the widow who has a limit-
ous insurers or developed for a sin-           In addition to using scores to     ed income and does not have any
gle insurer. These models are            underwrite or rate individuals, insur-   credit cards or credit have to pay
designed to predict the frequency or     ance companies are now using             more for her insurance?
severity of losses.                      scores for rating, they set score              Is a person really a bad insur-
      Like credit scoring models,        ranges to determine the premiums         ance risk if they do not use credit?
insurance scoring models use char-       to be paid by consumers. Then if               Is the Department of Insurance
acteristics from a credit report,        the insurer wants to increase its        or some other body required to
weight them in a certain manner,         book of business, the acceptable         review the detailed composition of
and then determine a numeric             score ranges may be decreased or         insurance scoring models and report
score. Insurance scoring models to       if the insurer wants to decrease its     to the legislature and public on their
be used in underwriting or rating of     book of business, the acceptable         review?
automobile insurance often are           score ranges may be increased.                 Is any of the information need-
designed to predict the frequency of          This type of change to an insur-    ed by the Department of Insurance
losses, while models developed for       er's scoring requirements has noth-      to effectively regulate insurers' use
the residential property market are      ing to do with changes to an individ-    of consumer credit information cur-
most often designed to predict the       ual's credit report or ultimate credit   rently declared exempt from public
severity of losses.                      score, but is driven by business         disclosure by the legislature?
      Insurers do not generally dis-     decisions made by an insurer. Thus,            Should the use of insurance
cuss credit reports, credit scores, or   after being insured by a company         scoring models be prohibited unless
the reason codes with consumers.         for some period of time, a consumer      the insurance companies provide
That responsibility is usually           may be charged a higher premium          full disclosure to the Department of
assigned to the credit reporting         due to his/her credit score when         Insurance of the factors, weights,
companies, but since the credit          nothing in the consumer's credit         and algorithms utilized in the scor-
reporting companies have not creat-      report or score has changed.             ing model?
ed the model or designed the rea-             Here are some concerns                    As you can see, the current
son code explanations, they can          agents and regulators have with          unregulated use of scoring models
seldom explain to the consumer           scoring models:                          is subject to uncontrollable abuse.
what happened, nor can they tell              Are the models used by insurers           Is the credit data used by insur-
consumers what to do to improve          affected by geography, ethnicity,        ers in their models accurate?
their scores.                            income, race or age?                           In 1998 the U.S. Public Interest
      When the consumer requests              Are there any standards that        Research Group conducted their
the reason for their score, they gen-    require insurers or model makers to      sixth study on credit report accura-
erally receive a copy of their credit    prove causation between a specific       cy. The report concluded that 29%
report which does not inform them        credit factor and risk before they       of the credit reports contained seri-
of how the score was developed or        may be incorporated in the model?        ous errors. Serious errors were
what factors on the credit report             Are medical related credit delin-   identified as false delinquencies,
were used to develop the score.          quencies excluded or specially           false public records, false judgments
And the explanations they do offer       weighted in scoring models?              that belonged to a stranger, or credit
frequently add to the confusion.              Are thin files being negatively     accounts that did not belong to the
      For example, some of the rea-      scored?                                  consumer.
sons that are provided to con-                Are frugal individuals who do             Seventy percent of the credit
sumers include: too few satisfactory     not believe in using credit for pur-     reports contained mistakes or errors
revolving accounts, too few satisfac-    chases being punished with higher        of some kind. Twenty percent of the
tory finance installment accounts,       insurance premiums?                      credit reports were missing major
too few satisfactory bankcards                Are the economically disadvan-      credit cards, loans, mortgages, or
(What does "satisfactory" mean?          taged required to pay higher insur-      other accounts that are critical in
And how many are required to be          ance premiums?                           demonstrating consumer credit wor-
considered satisfactory?), excessive          Are the people who, through no      thiness.

                                              The Voice • 7 • Spring ’02
Allegations of fraud
Former FBI agent testifies about Allstate’s use of credit scoring
Statement of Alfred W. Scudieri                                 allegedly substantiate the validity of credit scoring,
       From 1969 until 1995, I was employed as a special        NAIC failed to answer either question.
agent of the Federal Bureau of Investigation. I special-              I also interviewed a significant number of sales
ized in the investigation of complex fraud matters              agents employed by various insurance companies utiliz-
including major stock and options frauds, commodity             ing some form of credit scoring, a large number of
frauds, international investment frauds, and frauds com-        whom are members of NAPAA, the National Association
mitted against the government of the United States.             of Professional Allstate Agents. In fact, I spoke with
From 1989 until my retirement in 1995, I supervised all         more than 170 agents, 132 of whom are independent
FBI fraud investigations in central Florida.                    contractors with Allstate. From these contacts, I learned
      In July 1995, I began employment as an investiga-         that, within the automobile insurance industry, Allstate is
tor with the law firm of James Hoyer and Newcomer.              considered both an originator of the concept of credit
This plaintiffs' law firm, located in Tampa, Fla., special-     scoring and a leader in its implementation.
izes in representing the victims of complex fraudulent               In the interest of brevity, I confine my following
schemes. A substantial portion of our cases involves            observations to the activities of Allstate, which is gener-
fraudulent conduct in the insurance industry.                   ally recognized as having created the industry's credit
       I have developed many sources of information who         scoring paradigm.
are current and former insurance agents or independent               I have learned that in the fall of 2000, Allstate,
contractors. More than two years ago, I learned from            emboldened by the failure of the NAIC to pierce the veil
some of them that Allstate was using a Fair Isaacs Co.          of credit scoring, elevated the technique to new heights
(FICO) credit score as a component of its Integrated            by replacing the IRMS system with its newer Strategic
Risk Management System to arbitrarily deny automobile           Risk Management program. The SRM program relies
insurance to inner-city minorities.                             even more heavily upon credit scoring than did its pre-
      FICO scored prospective clients as "Clean,"               decessor.
"Acceptable," or "Unacceptable." According to former                 SRM utilizes a computer generated Insurance
agents of Allstate, a disproportionate number of minori-        Financial Stability score, which rates applicants on a
ty, inner-city applicants were rated "Unacceptable" and         scale from one to five, with five being the worst. A major
denied insurance. Due to the resulting decrease in busi-        component of the IFS score is credit history.
ness, many Allstate sales offices were relocated to sub-             I have learned that agents have complained of diffi-
urban areas, making it even more difficult for inner-city       culty understanding SRM and that IFS scores appear to
residents to purchase quality automobile insurance.             be arbitrary. When agents inquired of their regional
      I have seen a map of south Florida on which col-          sales managers regarding the formula used to deter-
ored pins were inserted to indicate the location of             mine IFS scores, they were told, "It's a secret." When
Allstate offices in the 1980s. A different color pin indicat-   they further inquired as to what to tell clients who ques-
ed the location of Allstate offices 10 years later. It was      tioned their IFS scores, they were told, "Tell them the
evident from the pin placement that Allstate had virtually      system is too complicated to explain."
abandoned its south Florida inner-city offices in the                I have interviewed an elderly couple who had been
space of a single decade. The agents believed that with         Allstate clients for more than 20 years. During that time,
credit scoring, Allstate contrived a clever, but insidious      they had never made a claim on their policy, never had
mechanism to exclude minority clients.                          an accident or a traffic citation, and always paid their
      Based on this information, I set out to educate           premiums on time. Yet when SRM was implemented,
myself in the field of credit scoring. I reviewed hundreds      they saw a substantial increase in their premium. Under
of news articles as well as industry and consumer publi-        the old system, the couple's rating was "clean." Under
cations relating to this issue. Perhaps the most compre-        SRM, their IFS score was "4."
hensive treatise I located dealing with this subject was a           I learned that IFS penalizes clients for a "no hit"
White Paper authored by the National Association of             (the absence of a credit record). So, for no other reason
Insurance Commissioners in 1996.                                than the couple preferred to make purchases in cash,
      In my estimation, this document identified two key        they apparently were charged a higher automobile
questions regarding the use of credit scoring: What is          insurance premium.
the relevance of credit scoring to automobile insurance              I also learned the "no hit" penalty was adversely
premiums? And, if there is a nexus, does it adversely           impacting single parents, whose own credit scores are
impact certain segments of society based upon race or           averaged with that of their oldest child to obtain a "fami-
other similarly offensive considerations?                       ly" IFS score. Since most of these children have no
      In the face of an adamant refusal by insurers to          credit history, they receive high IFS scores, allowing
reveal what they claim to be "proprietary" data that            Allstate to unfairly penalize their parents in the form of

                                               The Voice • 8 • Spring ’02
higher auto insurance premiums.                                computer, such as dates of birth and Social Security
      My investigation has revealed that many inner-city       numbers, and the computer establishes an initial premi-
Allstate agents are concerned that the implementation          um payment. If the applicant's credit is sub-par, the
of SRM has unfairly impacted their minority clients.           computer requires a 100% premium down payment.
Many of these clients are failing to renew their auto          The agents observed that this system is driving away
insurance policies after receiving rate increases and, as      many prospective minority clients who cannot afford to
a consequence, the agents' businesses are suffering.           pay their entire insurance premium in a lump sum.
      As proof that SRM’s negative impact upon minori-              An agent from California opined that Allstate's use
ties was not just a figment of their imaginations, one         of adverse credit information to deny premium install-
agent assembled a list of all of the client renewal            ment payments is a violation of that state's Proposition
notices he received since SRM was implemented. The             103 insurance reform initiative – and therefore illegal.
notices showed the names and IFS scores of each                     The same practice is going on in Florida. Recently
client. Since the agent personally knew his clients, he        a minority applicant sought premium financing from an
was able to divide the notices into three piles: Anglos,       independent finance company in order to make a
Latinos, and African-Americans. He then averaged the           required 100% down payment. Under this arrangement,
IFS scores of each pile and determined that Anglos             Allstate had no financial liability. Allstate forbade this
scored 3.8, Latinos 4.1, and African-Americans 4.8.            practice, leading the applicant to believe that Allstate's
Additional samplings have produced similar results.            motivation in requiring a 100% down-payment was not
     The inner-city agents I have talked with have been        to assure the creditworthiness of clients, but rather to
unanimous in their conclusion that unless Allstate recon-      deny policies to a certain class of client.
siders the use of credit scores to establish premiums,              Over the course of the last several months, I met or
they will lose the vast majority of their minority clients     spoke with representatives of the following automobile
and be forced out of business.                                 insurance agent associations: The United Farmers
     Another area of concern relates to Allstate's use of      Agents Assn., The National Assn. of Professional
adverse credit information to deny installment payments        Allstate Agents, The Nationwide Insurance Career
of premiums – again, to the detriment of minority clients.     Agents Assn., The National Assn. of Farm Bureau
     Recently, agents from California and Florida told me      Agents, The National Assn. of American Family Agents,
similar stories. They enter identifying data into Allstate's   and The National Association of State Farm Agents.
                                                                    These associations, which represent thousands of
                                                               active automobile insurance agents, all oppose the use
  Farmers Insurance Agents                                     of credit scoring to some degree. They consider credit
                                                               scoring to be nothing more than economic redlining.
        Great savings on all your                                   I asked a number of the agents with whom I have
                                                               met to appear here today and tell you first hand of their
      printer, copier & fax supplies                           aversion to credit scoring. Fearing retaliation, they have
                                                               all declined. So, they asked me in their stead, to convey
      New Version Printer Ribbon                               to you how inappropriate, offensive, and inherently
                                                               unfair they perceive this practice to be.
           for IBM AS400 / System 36
   Costs less, better quality & yield
                                                               Indiana bills aim to curb
   IBM 4224 / 4230 Printer Ribbons                             use of credit scoring
      Discounts for IBM 4224 printheads                            INDIANAPOLIS (BestWire) – Indiana lawmakers
                                                               are throwing a barrage of bills at the practice of credit
    Toner Ctdg - IBM Infoprint 21                              scoring, seeking to limit the use of credit data by insur-
                                                               ance companies.
  Great discounts on all other printer and copier supplies!        Senate Bill 409 would limit the importance of credit
      30 day billing - Satisfaction guaranteed                 scoring in making auto and homeowners underwriting
                                                               decisions and impose notification requirements on
        We currently supply 1,000s of                          insurers.
                                                                   Senate Bill149 would ban insurers from using "any
      Farmers agents & DMs nationwide                          adverse information" in consumer credit reports, while
                                                               permitting the use of positive information.
       Special Discounts for UFAA Members                          House Bill 1074 would ban the use of credit-based
                                                               insurance scores outright.
       SUN PRODUCTS                                                House Bill 1164 would require approval from the
                                                               Department of Insurance for any use of credit data for
         800-786-3225                                          insurance scoring.
                                                                   House Bill 1384 appears to be similar to the bills
 The preferred choice of Farmers Agents nationwide             already in play.

                                               The Voice • 9 • Spring ’02
WE ARE UFAA!
   And why are we so proud of that?
           Our past legal endeavors now allow you to have that PC on your desk
           — including the new Dell computer being made available to the agency force.
           Our efforts on the national level defeated legislation designed to change the IRS definition of
           independent contractors — a change that would have adversely affected our livelihood.
           Pro-agent legislation has been introduced in many states
           — and passed in several — that benefits all exclusive agents.
           UFAA Technology Services, a subsidiary of UFAA, now is available to all members.
           UFAA Technology Services will assist members with computer hardware and
           software questions and problems, recommend computer programs to assist members
           in operating their offices, and recommend hardware configurations.
           Our quarterly magazine, The Voice, is published with you, the member, in mind.
           It regularly addresses issues, reports current events, and provides you, the member,
           with a chance to freely express your opinion.
           Our nationwide activities opposing agent-owned ACA accounts led to the
           management company creating a company-owned ACA — saving you money.
           We have produced and made available our UFAA Technology Video,
           which provides information valuable to your agency’s success.
           We have made available the information you need to set up a paperless office.
           Our efforts on the national level, in conjunction with the CEAA, effectively eliminated
           the 15.3% SECA tax on your contract value.
           Constant questions from our members nationwide led to lower E&O rates for all agents.
           We introduced the "Original" E&O Deductible Recovery Program to help you
           earn more money from outside business without the worry of a large deductible.
           Our outside legal opinion of the HMA agreement
           was designed to assist you in making decisions about your future.
           We are a member of the Coalition of Exclusive Agent Associations (CEAA) and, through
           our Washington, D.C., lobbyist, we have played a major role in protecting the interests
           of our independent contractor exclusive agents through national legislation.
           Weekly updates are e-mailed to our members to keep them informed
           about the latest developments.
           We have made available a 401K Retirement Plan for you and your employees.

Our association is forging ahead — assisting our members in developing their agencies, providing valu-
able information, and being active in the legislative arena to promote and protect our members interests.
Join with us now in this exciting endeavor.
       It truly is a great time to be a UFAA member!             The Board of Directors
                                                                 The United Farmers Agents Association
96% of your membership dues may be deductible as an
                                                                                                   An Association of
                                                           FARME R S




                                                                                       C I ATION




ordinary and necessary business expense
but is not deductible as a charitable deduction.                 A                                 Professional Farmers Agents
                                                                                  SO




                                                                       G EN
                                                                              TS A S
                                        Application for Membership
FARME R S




                            C I ATION
      A
            G EN
                       SO
                   TS A S
                                        United Farmers Agents Association
                                        8978 Watson Road #C, St. Louis, MO 63119                Phone: 800-275-8668                   Fax: 314-729-0598

      Mission Statement — The United Farmers Agents Association is a professional association
    committed to helping our members through education, communications, support, and information,
                      and to establish a true partnership with Farmers Group, Inc.

 Name: _______________________________________________ Chapter: ______________

 Address: _____________________________________________ Phone: _______________

              _____________________________________________ Fax: _________________

 Agent #: ___________ E-mail: ____________________________________________

 Dues: (Please select one)
 [ ] $300 annually [ ] $150 semi-annually [ ] $25 PAC [ ] $50 Associate, Affiliate or Career annually
 _______________________________________________________________________________

                                           United Farmers Agents Association, Inc.
 (Select one)
 [ ] Enclosed is my check for $ __________.
     In addition to my dues, I wish to contribute: $ _________ to the Declaratory Relief Action Fund.

 [ ] Charge to my credit card: [ ] Mastercard [ ] Visa

 Credit card number: __________________________________ Expiration Date: ___________

 Signature: __________________________________

 “Agents Helping Agents”
 The General Objectives of UFAA are:                                      The Specific Security Objectives of UFAA are:
 1. To create meaningful communication between                            1. A two-way negotiated contract.
  company and Agent                                                       2. For rendered services contractual compensation schedules
 2. To improve professional status in the community                        encompassing full commission of all premiums.
 3. To improve company-client relationship                                3. Agent ownership of policies and expirations.
 4. To improve Agent-to-Agent relationships                               4. Termination for just stated-cause only.
 5. To stand united to accomplish these objectives                        5. Ending discrimination of Agent or Agent authority.
                                                                          6. To foster cooperation for mutual benefit, between other
                                                                           agent associations.
 I, ________________________________, am currently a Farmers Insurance agent and do hereby
 apply for membership in the United Farmers Agents Association, Inc., and agree to abide by the
 bylaws and the code of ethics. I further agree with the above stated principles.

 (x) _______________________________________________________ Date: ___________
     95% of your membership dues may be deductible as an ordinary and necessary business expense but are not deductible as a charitable deduction.   03/02

            Authorization to honor checks drawn by the United Farmers Agents Association, Inc.
            For my benefit and convenience, I hereby request and authorize the United Farmers Agents
            Association, Inc., to draw a check in the amount of $ ________ on or about the 10th day of
            each month, payable to its own order. This authorization will remain in effect until revoked by
            me in writing and until they actually receive such notice. (Please include a voided check with
            this application.)
                              (X) __________________________________________________________
From the director:
Membership
Don’t wait until tomorrow!
By Steve Hooper                          common goal to influence change?               Whatever you do, do not make
     All right, I may have been wrong         I say to all agents: "We cannot      the mistake of believing you cannot
in assuming most agents really want      continue to be indifferent to the obvi-   make a difference! Take the chance
some say in our future. As I contact     ous mandated changes that will ulti-      that by getting involved, you will
more and more agents, in all parts       mately effect our agency's ability to     have a say in your future. Join
of America, many voice the usual         grow, as well as our ability to oper-     UFAA today, I guarantee you will not
reasons for not getting involved.        ate our agencies on a positive            be disappointed!
     The "UFAA is negative" excuse       instead of a negative result."                 "Agents Helping Agents" is what
just won't fly anymore, especially            It is time to get focused, folks!    UFAA stands for. We will not be
since so many adverse decisions          UFAA may not be the total answer          deterred from our goal and all you
beyond our control are being made.       to our dilemma and, as Membership         need to do to help influence your
     "The management company will        Director, I am open to a better solu-     future is fill out the application.
never listen" excuse also can be         tion. Many other professionals have            Fax the completed and signed
proved wrong. And, of course, my         supported their own professional          application with a copy of a can-
favorite excuse is "I can’t afford the   associations. Pilots, engineers, doc-     celled check to the UFAA National
$25 per month."                          tors, dentists, etc. long ago realized    Office (314-729-0598) and the staff
     You have all heard these excus-     the needs and advantages of sup-          at the National Office will take care
es, time after time. When are agents     porting all of their peers through a      of the rest.
going to realize the long term con-      professional association. So, what is          Join us today! Don’t wait until
sequences if we do not unite in a        the problem?                              tomorrow!


 When will you have to choose between loyalty and survival?
  By Steve Hooper                                            company had decided to take a claims-only attitude.
      One of my New Year’s resolutions was to gather         We agents cannot fault necessary decisions needed
  data from 2000 and 2001 that would show trends in          to offset losses reported by the management compa-
  my agency: sales comparisons, PIF, sales count, and        ny. But why are we driving away our long-time, loyal
  lines of business written in my agency.                    insureds, which are suddenly not good risks? So
      A side note, so you will not read negativity into      many factors – investment losses, eliminating mar-
  what follows: The data is only based on my agency.         kets, ill-advised credit scoring, and cancellation of
      First, I looked at PIF and discovered my PIF has       existing clients – have taken their toll on every agent.
  remained the same for several years, even though my            Of course, we are not without fault, but we all
  agency's annual sales count averaged over 2,000            know that decisions affecting our agencies every day
  each year. Simply put, the agency had not grown!           are planned in advance and without our input.
  Why? That's what I wanted to find out.                     Ultimate control of our destiny is in the hands of the
      Although the total sales count remained the same,      management company. We have no control over
  the lines of business changed dramatically. Personal       rates, underwriting, discontinued markets, or poor
  lines new business sales count declined, just in two       management of investments. But we are blamed and
  years, from a high of 1,176 in 2000 (an average of 98      we pay the price over time.
  sales count per month) to 726 in 2001 (an average of           Is it because most agents are not involved?
  60.5 per month). My all-time low was 20 sales count        Where are we going? What happens when we drive
  in December 2001. Again, Why?                              away the good risks? At what point will the risk of
      Commercial new business did not increase but           large numbers decrease to the extent that the
  viable, profitable, clean risks were being eliminated by   Exchanges are at risk and we could all lose? Is it time
  price increases or existing accounts were being non-       to make the move back to a marketing strategy –
  renewed without regard to loss history. Life policies      competitive pricing and large numbers of new house-
  issued and paid were up in 2001, but only because of       holds to offset losses reported by the management
  a change of focus due to the lack of competitive rates     company? And a final thought, when will agents be
  in our bread and butter markets, auto and fire.            forced to choose between loyalty and survival?
      It became obvious what was happening.                      Just some of my thoughts. What do you think? I
  Somehow, over a period of time, the management             can’t hear you! Why not?

                                             The Voice • 12 • Spring ’02
The Texas class action lawsuit
Alive and well
     The Texas class action lawsuit     the trial court erred in finding that    appeal could be heard in March or
involving the Achievement Award         the suit was appropriate to be han-      April. We could anticipate receiving
bonus program is alive and well.        dled on a class action basis.            a decision within 30 days to 60 days
     Attorneys Bobby Pryor and               Farmers' attorneys submitted        of the hearing date.
Dana Bruce are representing one         their brief to the court on about Jan.        Having spoken to Bobbie Pryor
current and one former agent in this    15, trying to convince the appellate     recently, I sensed his confidence
action, which contends Farmers          court that the suit should not be cer-   that, based on the evidence pre-
owes thousands of its agents            tified as a class action. Pryor and      sented to the trial court, the decision
amounts totaling as much as a $100      Bruce have until Feb. 5 to respond       to certify the class action will be
million as a result of miscalculating   to the brief filed by Farmers attor-     upheld, which is what we want.
the Achievement Award bonuses           neys, and then Farmers gets an                Once that happens, agents will
owed to the agents.                     opportunity to offer rebuttal to what    receive court-approved notice simi-
     As reported in the last issue of   Pryor and Bruce filed.                   lar to what was sent out in the
The Voice, the court certified the           The rebuttal has to be submitted    Mason v Farmers class action suit
class action suit on Sept. 5.           to the court by Feb. 25. Of course,      recently. Then agents have the
However, in Texas there is what         either side or both sides can ask the    opportunity to decide if they want to
amounts to an automatic appeal          court for additional time.               be a member of one of the classes
process on the question of whether           If things go as scheduled, the      or opt out of the suit entirely.
A little history lesson
The greatest risk is not taking one
By Bob Jasak                              want to take any risks. Many could      was so harsh that he never recov-
     In 1776, the colonies were at        not grasp the idea of freedom and       ered his health. His lands were
war with the British. British rule had    self-government. Many did not want      ruined, his library burned, and his
become harsher while taxes had            to upset the British.                   livestock seized. He lived out his
become a huge burden. Looking for              But the idea of freedom was        days dependent on his friends.
a solution, delegates from the            spreading. Royal colonial govern-            The colonists knew their lives
colonies met in Philadelphia in June      ments were being ousted up and          would only get more difficult if they
of that year.                             down the eastern seaboard. Eight        did not unite and act. They had to
     Thomas Jefferson wrote out the       colonies voted for independence.        take this leap of faith because their
delegates' ideas in the form of a              The price of freedom would be      situations would only get worse.
declaration. Thirty-nine rewrites         costly to many who signed their              As Farmers agents today, we
later, delegates signed and ratified      names to a document declaring that      must ask ourselves: "Are we better
the Declaration of Independence.          this is a free land. For example:       off today than we were five years
     The signers knew that without             Francis Lewis, New York: His       ago?" Are incomes up? Are work-
unity they would never be free to         wife was captured by the British and    loads less? Is the job easier? Does
run their lives as they saw fit, nor be   died in captivity. Lewis died in        the future look brighter? No? Is the
free of burdensome and ever-              poverty, having spent his fortune for   cost of waiting for things to get bet-
increasing taxes. The vote had to be      the cause of independence.              ter going to get costlier?
– and was – unanimous.                         Richard Stockton, New Jersey:           For things to get better, agents
     Not everyone in the colonies         Locals loyal to the British dragged
agreed with this idea. Many didn't        him from his bed. His imprisonment              Continued on p. 15




                               Sys 3x ad



                                              The Voice • 14 • Spring ’02
A call to arms
Ethical behavior
By Bernie Clark                                              ment company to trim expenses. A logical resolution to
     The word ‘ethics’ has a noble sound, strong and         this would be to provide the computer system to all
righteous. Webster's defines it as: 1. The discipline        agents doing business.
dealing with what is good and bad and with moral duty             The question is, how lucrative is the IBM/Farmers
and obligation. 2. (a) a set of moral principles or values   contract? Couple this with the knowledge that the inde-
(b) the principles of conduct governing an individual or a   pendent agents that Farmers is putting into the new
group.                                                       states have no computer costs. Perhaps the new Dell
     In the Presidents Council edition of The Achiever,      computer will take care of this, or perhaps the DRA
there was an article describing a break-out session          action will change the issue.
dealing with the subject of Ethics. The article described         A very speculative ethical issue is the relation-
the discussion items (proper rate class administration,      ship between management and the many vendors that
stealing other agent's policies, and writing all eligible    we use in claims. Companies, like Lynx and other glass
business in a Farmers company) and outcome of the            companies, are said to be paying a bonus or a volume
discussions.                                                 discount, (call it what you will) back to the management
     The last line in this article read: "It really comes    company on an annual basis.
down to each of us – district managers, employees, and            This is unsubstantiated but, if true, these companies
agents – making sure that we're heading in the proper        would be charging the Exchanges more than necessary
direction."                                                  to pass money back to the management company. If
     Is it me? Or is there something or someone miss-        this pass through is, in fact true, the Exchanges are
ing in this scenario? Is ethics just for the triad men-      being depleted unnaturally. We all hope this is not the
tioned? Is there a corporate exemption from ethics?          case. Maybe the management company can address
     My first thought was that there is an invisible line    this rumor for the sake of morale.
after the DM, agent, employee level that shifts from              FARA/FPRA. Is ethics involved in the controversy
ethics to a theory that "the financial bottom line is all    surrounding this issue? Absolutely, and this issue will
that matters." Our stockholder's return on investment is     ultimately be resolved by the regulators.
the only issue, and this will be achieved above the               I believe most of the opposition to this rating
noble notion of ethics.                                      method, is based on the lack of knowledge as to what
     This, of course, is corporatewide, and an awful         makes up the models. Actuaries have always been con-
example is Enron. The Enron managers apparently had          fusing, but there was faith in the criteria used to gener-
no concept of ethics, or at the very least chose to not      ate insurance rating models, such as tickets and acci-
apply the discipline in favor of money.                      dents. With this mysterious credit based system, the
     With respect to the management company, there           rates are no longer objective but an undisclosed, seem-
are issues that may test the notion of corporate ethics.     ingly subjective factor comes into play, and this is just
Some are speculative and may have no substance               not fair, i.e. ethical.
whatsoever, others are being litigated, while still other         In conclusion, we need a "call to arms" for ethical
current issues will be decided by regulators.                behavior from all involved. Agents should be held to the
     The computer? How much time and energy has              highest level of ethical standards. Likewise the manage-
been spent on this issue? The ethical concept here is:       ment company should lead the way with corporate prac-
Should management be making money on the backs of            tices that do not cause speculation about but actually
a key business partner, the agent? Agents are doing          promote reassurance that ethics will be a part of the
more and more on the system, allowing the manage-            Company's core, regardless of the bottom line.


A little history lesson                                                                        Continued from p. 14

must join fellow agents looking for     doer of deeds could have done            devotion, who spends himself in a
answers, looking for a better way.      them better. The credit belongs to       worthy cause, who at the best
We must take that risk, because the     the man who is actually in the           knows in the end the high achieve-
greatest risk is not taking one.        arena, whose face is marred by dust      ment of triumph, and who at worst, if
                                        and sweat and blood, who strives         he fails while daring greatly, knows
    To Dare ...                         valiantly, who errs and comes up         his place shall never be with those
    "It is not the critic who counts,   short again and again because            timid and cold souls who know nei-
not the man who points out how the      there is no effort without error and     ther victory nor defeat."
strong man stumbles or where the        shortcomings, who knows the great                        – Theodore Roosevelt

                                            The Voice • 15 • Spring ’02
From the director:
Legal Activities
Waiting for a hearing date
By Larry Tencer                                              require that I provide substantiation of such business
     We filed the Declaratory Relief Action in October       use. I will be responsible if any tax liability is assessed
2000, and I'm sad to report we are still in the prelimi-     for non-business use of the equipment."
nary discovery stages. The DRA is our request that the            We haven't sought an attorney's opinion on whether
court determine whether our reading of the Agent             or not the form gives the Company the right to inspect
Appointment Agreement or the Company's is correct on         files on the computer. I can imagine a DM or auditor
five specific points:                                        coming into an agent's office and asking or demanding
     (1) Are the Companies obligated to provide the facil-   to see them while reviewing Farmers policy files.
ities to access our policyholder records (computer and            A word of caution about using the Company’s
telephone line charges) at their expense?                    Internet service provider: When you go on the Internet,
     (2) Are we required to rewrite business placed with     your e-mails and what you download may be viewed by
other companies during moratoriums or when ineligible        your provider. However, using the Company's ISP will
for Farmers, when the moratorium ends or the business        save you the cost of paying for an ISP yourself.
becomes eligible?                                                 Another attractive feature of the Company's offer is
     (3) Are we required to write the “Farmers Brand         the six months of free AOL service. This eliminates the
Products” (LTC, MBI, HO Plus, Bonds, and Flood)?             potential problem of using the Company's ISP.
     (4) Does our AAA obligate the Companies to pay for      Remember, though, that if you download material from
Series 6 & 63 licensing?                                     the Internet, it resides on your hard drive until you
     (5) Are we required to submit applications when the     specifically delete it.
Companies don't offer all the coverages or features that
a prospect or policyholder needs or requests?                                      Advertisement
     In our last issue, I expressed the hope that my next
update would indicate we were making progress.
Unfortunately that is not the case at this time.                         Stop the
     The court wanted the parties to submit the unre-
solved discovery issues to a court-appointed referee
(normally a retired judge). We were asked to submit the
                                                                         b le e d in g !
name of a referee Farmers and UFAA could agree on.             Are you frustrated with your agencies’
Because we couldn't agree, we each submitted two               commissions going out the door because
names and asked the court to make the selection.
     That was in November, and the court notified us of
                                                               you’ve lost your markets? Has your
the selection in December. The attorneys contacted the         current company cut coverages or raised
referee then and agreed that statements of the disputed        rates so much your clients can’t afford
discovery issues would be submitted to the referee by          you anymore?
Jan. 10. A tentative hearing date was set for Jan. 28,
although the referee could make his recommendations            The American Casualty Agency offers
to the court before that date without a hearing.               both Standard and Non-Standard
     A few days prior to Jan. 28, we were notified that        Personal and Commercial lines markets
due to a death in the referee's family the hearing date        for Texas agents. HO-Bs — No Problem!
would have to be rescheduled. As of this writing, we
have not been advised of the new hearing date.                 In addition to a very competitive com-
     Since Mr. Feinstein announced the Dell computer
giveaway, we've had scores of calls from agents asking
                                                               mission schedule, we also will search for
where the catch was.                                           the best rates and companies available
     I wonder how much the computer giveaway deci-             and even quote the risk for you.
sion was influenced by the DRA, but the offer appears
to be straightforward — and the most generous one I            Quotes and Application submissions are
can recall the Company making in the last 25 years.            now done directly through our website.
     The Acknowledgment and Acceptance form seems              For more information, please visit us at
reasonable too, if you understand that the computer use        www.acitx.com (Careers) or call Phil at
should be limited to just Farmers business. The form           800-766-2478 or 512-338-8100.
states: "I also understand that the federal tax code may

                                            The Voice • 16 • Spring ’02
Declaratory Relief Action
UFAA filed a Declaratory Relief Action (DRA) in California asking a court to
interpret a number of provisions of our Agent Appointment Agreement (AAA).
This is not a lawsuit of the traditional variety. We are not seeking monetary
damages, only the court's determination of what our AAA really says on
certain provisions that we seem to interpret differently than the management
company does.

Here are five questions. Take a minute and answer each one. Then read on.

Question                                                         Yes      No

1. Is Farmers obligated to provide, at its expense,              ❏        ❏
   the computer equipment and phone lines necessary
   to access policyholder records?

2. Must business written during moratoriums or when              ❏        ❏
   ineligible have to be rewritten to Farmers once the
   moratorium ends or when the business becomes eligible?

3. Does the AAA require agents to sell                            ❏       ❏
   Farmers-brand products?

4. Is Farmers obligated to provide educational and               ❏        ❏
   sales training at its expense?

5. If Farmers does not offer a particular coverage or            ❏        ❏
   policy feature, required or requested by a prospect
   or policyholder, can agents place that business elsewhere?

How many did you answer "Yes"? Would you like to hear what the court
has to say? For UFAA to stay the course and obtain a court ruling, money is
needed. Did you contribute to the DRA fund in 2001? If yes, thank you.
If not, would you make a contribution now?
If you are paying your dues monthly, send the National Office an e-mail
(ufaa@aol.com) or a fax (314-729-0598) and say, "Increase my monthly
contribution $3 per month." If you are not on monthly pay or are not a
member, just send your check to UFAA, 8978 Watson Road #C, St Louis, MO
63119. Make your check out to UFAA, DRA for at least $36.
You'll be glad you did.
UFAADirect
Keeping you informed
     Almost every week, UFAA               ing to rewrite the policies to the HO-         If you write Long Term Care
sends out UFAADirect, a communi-           A (Named Peril) format.                   through CNA/Farmers, you might
cations tool to keep agents                     So the agents are worried about      want to go to www.lps-ltc.com/soft-
informed. The e-mail goes to well          commissions (no January fire              ware/farmers/farmers.htm. Looks
over 2,000 agents. If you are not          renewals), the tremendous amount          like you may be able to update your
receiving UFAADirect, send an e-           of work involved in rewriting the         LTC software.
mail to ufaa@aol.com, giving them          business, the loss of PIF and con-
your e-mail address and name.              tract value, and the possible future           FAQ: One of the most frequent-
You'll be added to the list.               E&O claims.                               ly asked questions deals with failed
     Some excerpts from this valu-              In the midst of all this, one DM     DMs returning to the agency force:
able newsletter:                           says, "I know you will all work very      "Why does a failed DM get to
                                           hard on this and not let the PIF          become an agent and take over a
      So exactly when do we switch         drop, as that would mean you were         good size agency?" The answer? I
from the System 36 and AS/400 to           a deteriorating agency and would          don't know. One fairly new state
using the Dashboard to do APPS             not be acceptable."                       executive was heard to say he
and FPPS work? One high-ranking                 One district banded together         wouldn't allow any more "sweet
home office person was recently            and wrote a letter to the state exec-     heart deals" but turned around and
quoted as saying the full transition is    utive concerning auto and fire rates,     let a DM take over a good size
likely to happen in two years.             FARA and FPRA, mobile home                agency. I guess we can chalk this
Another high-ranking home office           rates through Foremost, loss of PIF,      up to the management company's
person was quoted as saying some-          and their future as agents. The letter    “normal business practices.”
time in the first six months of 2002.      drew a response from the state
So, you guess! Meanwhile, DMs are          executive, and a meeting was held.            The Texas Senate held a hear-
still trying to sell the agents on leas-   Some good things were said. Now           ing on wrongful termination on Dec.
ing (renting) an AS/400.                   they have to sit back and wait to         4. More than 30 agents from UFAA,
                                           see if the meeting produces any           NAPAA, NASFA, and NIICA showed
     Credit scoring continued: An          positive action or just good words.       up to testify for agents’ rights. I am
agent had two customers whose              We will keep you posted.                  very pleased to report that the day
FARA and/or FPRA scores changed                                                      went well for agents.
to "I" and couldn't figure out why. He          Transitioning to the Internet,
wrote the Business Support Center          Response #1: "With regards to the              Arizona is a test state for the
and asked for assistance. The reply        demise of the AS/400, it won't hap-       alliance between the management
said, "Apparently between [month           pen until 2004. Sure, you will see        company and Bank of America. It is
and date] and [month and date], as         bits and pieces of APPS and FPPS,         reported that one of the 50 selected
well as currently, Mr. [name] has          etc., go on the web as the next 12        agents recently pulled out of the
chosen not to use credit. As such,         months pass by. The company just          program. Why? It seems that agents
the model can only apply a FARA            doesn't have the resources to make        will be required to write a minimum
and FPRA code of I." If a person           the full transition before then."         of 40 policies each month or face a
stops using credit, he is penalized             Response #2: "I had a conver-        "rent" charge of $1,500.
on his auto or home insurance              sation with the person in charge
rates? If a person stops using credit,     about being able to us APPS and                Farmers agents are taking
his potential to have a loss increas-      FPPS via the Dashboard.                   strong action to correct inequities in
es? Has anyone in the home office          President's Council agents have           the current captive agency scheme.
considered changing or correcting          had access to 'Host on Demand' for        We are asking UFAA members to
that portion of the "model"?               a couple of months. This allows           be prepared to write to their legisla-
                                           them to sign on to Dashboard and          tors and to make phone calls when
     Mold claims have Texas agents         get into APPS and FPPS.                   pro-agent legislation is on the agen-
are in deep trouble. The manage-                It is being pulled Dec. 1, howev-    da in your state legislature. We
ment company chose to place a              er, until final approval to go national   must have your help, your eyes and
moratorium on new business home-           is approved. When final approval is       your ears, and your support in order
owner policies (Called HO-B in             given, it will be offered for a fee       to make positive progress. If you are
Texas) and then decided to cancel          [emphasis added] similar to but less      aware of pending insurance legisla-
all existing HO-B (Special Form)           than IVANS."                              tion in your state, please forward the
business. Agents are now busily try-                                                 information to govaffairs@ufaa.com.


                                               The Voice • 18 • Spring ’02
     From a company employee:             will soon start surcharging
"As much as I like defending my           Homeowners policies based on
                                                                                    Before you file
company on this issue, I cannot dis-      claims. If you report a claim to the      your tax return ...
pute the facts. Agents with varying       company (required by law), and
backgrounds (lots and little experi-      there is no money paid out, the sur-          If you left the agency force in
ence) are terminating, but the bot-       charge will still apply. If you fail to   2000 or 2001, we may have infor-
tom line is this; it's not the opportu-   report the claim, you are in violation    mation that will benefit you when
nity it once was. To borrow the           of the California law. Again, the         you file your tax return. We need to
words of the big boss: ‘The defini-       agent is right smack in the middle        know what your 1099 said concern-
tion of insanity is doing the same        without any help and any support.         ing contract value payments.
thing but expecting different results.’   How about if the management com-          Contact the UFAA National Office.
That speaks volumes of our agency         pany changed the rules and only
development plan."                        surcharge a policy when the dollar
                                          amount of the claim exceeds $200?         System 36 users
     California Insurance Code:           (I just picked that number out of a           Do you still have a System 36?
Section 2695.5. Duties upon Receipt       hat so don't scream about it!) Then       We need to determine the number
of Communications. Subsection (d):        the agent would not be left holding       of agents and agencies affected by
Upon receiving notice of claim,           the proverbial bag.                       the recently announced non-support
every licensee or claims agent shall                                                policy. We are thinking about
immediately transmit notice of claim           FARA and FPRA scores are             searching for a replacement mainte-
to the insurer. Failure of the licensee   used to "predict future losses." Fair     nance agreement. If you have a
or claims agent to immediately            Isaac says, "An Insurance Bureau          System 36, please contact the
transmit notice of claim to the insur-    Score is a snapshot of your insur-        UFAA National Office by e-mail
er shall constitute a separate and        ance risk picture at a particular point   (ufaa@aol.com) or fax (314-729-
distinct violation of California          in time." Now, correct me if I am         0598) and tell us your name,
Insurance Code Section                    wrong, but those seem to be contra-       address, phone number, and how
790.03(h)(3) ... In California, they      dictory statements.                       many agents are in your office.




                                              The Voice • 19 • Spring ’02
                                         Put your money
                                     where your mouth is
       Most of us still hope Marty will keep his promises
By Steve Lenard                                My DM, who is probably as           pardon some of us for a little skepti-
    Many agents respond to the            good a guy in the field as there is,     cism. I'll bet you are referring to the
comments made in the UFAADirect           came back equally positive. We had       computer offer. If so, you are correct
correspondence. Here is a reply to a      our district meeting yesterday, and      in your assumption that you will be
DM who responded:                         he spent about 45 minutes review-        hearing our side of the story – that's
                                          ing all those warm feelings, and I       what we have do.
      I read your recent e-mail with      understand his enthusiasm and                  I'm sure most of us still hope he
interest, and I'd like your permission    desire to share them. However, I         follows through, but what happened
to post your comments on our UFAA         didn't hear anything of substance        to his other statements and putting
web site.                                 that will really help me tomorrow,       his money where his mouth is?
      You see, unlike the company,        and perhaps you could help.                    Increased interaction shares (in
we can accept criticism without call-          I heard him explain that            case this was before your time,
ing the messenger evil. I think if you    Farmers was "at a crossroads" – I        that's the money we get for doing
are honest with yourself, you will        believe I've heard that every year       the management company's job).
admit there is a strong perception        since he took the reigns. I'm sure       Even though he didn't have to, he
by management that UFAA is pure           he's right, but so? I heard how we       "promised" that was coming, but I
evil and I'd like to respond briefly      had to "dance with the one that          seem to have missed it.
(yeah, right).                            brung us" and sell a severely inferior         Or, what about our "free copy of
      What kind of hypocrisy is that      HO product in Texas at premiums          Outlook"? That was a long time ago
belief, when our own company              twice as high as the competition’s       when he toured the territory tireless-
brochures sent to all agents say that     superior product, even though            ly, at great personal discomfort,
we must all have an "inquisitive          weeks previously our highest man-        telling us all the "positive" news and
mind, challenging everything we do        agement in the state gave approval       making many promises.
and how we do it with the goal of         for us to write this business else-            Or maybe we can find that $20
making Farmers a better company"?         where. That's quite a dance they         IVANS connection so we could actu-
That's what we do!                        "brung us" to – a slam dance.            ally sell insurance at "the kitchen
      If you question the legitimacy of        I heard about how insistent         table" again. Do some occasional
that quote, check out the "Special        Farmers was that agents were the         work from home late at night to free
Projects, Core Values" brochure           choice for distribution of our prod-     our days for more selling.
entitled, "Our Future is in Your          ucts. Hey, guess what, I've heard              Perhaps he's walking the walk
Hands". Check out the "Drivers of         that before also. But actions (and       by putting our products within 19%
Success" column and read how              other communications) speak vol-         of the competition. Is that the case
management has told us they "will         umes. Why do they feel the need to       in your neighborhood? It's not in
thrive when each of its people, you       continue to explain that fact? You       mine, not by a very long shot.
included, has the individual fortitude    don't see UFAA running ads declar-             The list goes on with broken
to make the company change." Yes,         ing we have blood in our veins. It's     promises and a broken computer
that's an exact quote.                    just a fact and therefore doesn't        system. Maybe it's finally costing the
      Can we admit that both sides        require verification.                    company too much not to fix it
have their flaws and we need to                Does it mean that Farmers is        because it won't be due to any phil-
work on ways to increase our values       evil for exploring other channels –      anthropic desire – that's not what
benefits to the agents?                   that's what they have to do. Does        corporations do. They are bottom-
      I'm glad your attendance at the     that mean that my DM is evil for         line readers – they have to be.
conference was for positive rea-          espousing those beliefs – that's               Has it been fatal? Not yet,
sons, and I hope it indeed does help      what he has to do. Anyone who is a       because most agents are positively
most DMs and cause them to bring          thinking, vibrant businessperson         doing what they have to do to make
their newfound ideas to their agents.     does the same thing – what they          their customers happy and provide
I'll bet many attended because the        have to do.                              for their needs in spite of manage-
fallout from non-participation is real,        You say Marty is going to put       ment’s obstacles and that probably
however. This is purely speculation       his money where his mouth is. I          does deserve a standing ovation. At
on my part.                               hope he does this time, but please       the same time, it probably doesn't –

                                              The Voice • 20 • Spring ’02
it's just what we have to do.                      By the way, if DMs were to get
      Anyway, I hope you at least             together and form an association, it
                                                                                       System 36 users
appreciate the fact that your time            wouldn't be called a "union of the            UFAA needs everyone’s e-mail
and effort in writing to our Associa-         self-employed (whatever that's           address – and it is easy to do.
tion wasn't merely tossed to the              about)." I guess it could be called           Just send an e-mail to
side. I too have many things to do.           "something so silly" if that were the    ufaa@aol.com. Say, "Add my e-mail
      I put my oldest son to bed              name they chose, but it would be         address to your database." Please
about 45 minutes ago. Another day             very strange, wouldn't you agree?        include name and postal address so
at kindergarten tomorrow, and he'll           Non-employees, individuals and,          we can identify senders.
need his rest. My wife will be                yes, companies do not form unions,
through talking on the phone shortly,         but they do enter associations.
and we'll spend some time together                 In case you doubt this, check       Been audited?
for a little bit. Then I'll log back onto     with the management company.
the Internet and do a little more             They are involved in several associ-          1. Have you been audited in the
Association work, and before you              ations and seem to very well under-      last two years?
know it, 6 am will come around, and           stand what that's all about. Maybe            2. Did those conducting the
it's back to business – because I             they could let you in on it next time    audit schedule an appointment?
love what I do, I love my family and          you're in LALA land. Just ask!                3. If the request for an appoint-
will provide for them, and I hope my               Ok, that was a little dig, but it   ment was in writing, do you still
efforts in all areas reflect my pas-          was in fun. Free exchange of ideas       have the paper?
sion to be the best! Surely it will fall      is rarely a bad idea. I hope you're           4. Did those conducting the
short of the goal, but time will tell if it   not one of the ones that want to         audit look only at Farmers policies?
can be declared successful.                   extinguish that freedom.                      Please e-mail (ufaa@aol.com)
      One thing is certain: Every day I                                                or fax (314-729-0598) the informa-
will become better – because that's           Steve Lenard is Director at Large        tion to the UFAA National Office.
what I have to do.                            for UFAA.                                This information is very important to
                                                                                       all agents, so please act now!




                                  SOS ad



                                                  The Voice • 21 • Spring ’02
From the director:
Governmental Affairs
On the legislative front
By Mark Martin                            agent associations – including              response: "We don't know why it
     National — What a difference         strong support from CEAA groups –           works." A lawsuit recently was filed
one year can make! When the 107th         there is company opposition.                by current and former Allstate
Congress convened for its first ses-                                                  insureds over this issue.
sion, the budget was in surplus,                Terrorism insurance — As the               Territorywide, UFAA members
continued strong economic growth          first session of the 107th Congress         are working diligently to reverse the
was projected, and the new Bush           drew to a close, legislation providing      adverse effect credit scoring is hav-
administration was laying out an          a federal backstop for terrorism            ing on the businesses they have
ambitious agenda that included pay-       insurance was not enacted, despite          worked so hard to build.
ing down the national debt, cutting       strong support by key lawmakers                  Getting involved in the legisla-
taxes, reforming education, modern-       and business groups. Although the           tive process, as well as having a
izing Social Security and Medicare,       crisis predicted by some failed to          unified voice to our parent compa-
and revitalizing national defense.        materialize, terrorism insurance            nies, can and will help preserve the
     Fast forward to January 2002.        costs are rising and coverage is            agency system and our ability to
The second session of the 107th           unavailable to some businesses              competently, honestly, and perma-
Congress convened Jan. 23 against         considered to be targets of future          nently provide the basic service we
a backdrop of a war on terrorism,         terrorist attacks.                          are all here for: being advocates for
federal budget deficits, an economy             Efforts are being undertaken by       our customers while earning a profit
in recession, and a November elec-        Congress and the administration to          for ourselves and the companies we
tion that will determine control of       compile information about the               represent.
Congress and set the stage for the        affordability and availability of terror-
2004 presidential contest.                ism insurance. Prospects of a feder-             Fighting back! — UFAA is tak-
                                          al backstop for terrorism insurance         ing strong action to correct inequi-
      Tax legislation — While there       rely upon documented cases of eco-          ties in the current captive agency
is little chance that any broad-based     nomic dislocation.                          scheme.
tax legislation will be considered this                                                    In conjunction with our CEAA
year, there are a host of tax-related          A little closer to home — The          counterparts, we are asking UFAA
issues on the legislative agenda.         continuing issue of credit scoring in       members to be prepared to write to
There also is the possibility that tax    the insurance underwriting and pric-        their legislators and make phone
code changes could be used to off-        ing process continues to develop.           calls when pro-agent legislation is
set the cost of other legislation.        Things are certain to change before         on the agenda in state legislatures.
      In addition to the tax proposals    the process has concluded.                       We must have your help, your
under discussion in the context of             More than a dozen states               eyes, your ears, and your support in
economic stimulus, other tax-related      already have adopted some limits            order to make positive progress.
issues that may be considered             on the use of credit scoring, and 25             If you are aware of pending
include HR 3139, authored by Rep.         to 30 states this year are expected         insurance legislation in your state,
Sam Johnson (TX) and Rep. Jerry           to debate further restrictions – if not     please forward the information to
Keczka (WI). The bill was written to      outright bans.                              govaffairs@ufaa.com. Thank you.
amend the Internal Revenue Code                The secret nature and weighting
of 1968 to provide for capital gains      of the various areas used in deter-
treatment for certain termination         mining the credit score are the
payments received by former insur-        major sticking points legislators are
ance agents. While this bill enjoys       running into. The insurance industry
support from various insurance            does not help that situation with its




 Please patronize our advertisers!
                                            The Voice • 22 • Spring ’02
‘Dear colleagues,’
Company letter amazingly addresses issues raised by UFAA
     Yet another "Dear Colleagues"       said, "Approximately 10 days ago,      about getting a virus when attempt-
letter, dated Oct. 30, 2001, was         we notified you that the training CD   ing to take the Fair Access test.
mailed to the agency force.              ... contained a virus." That was the   UFAA immediately posted the infor-
Amazingly, the issues addressed in       virus UFAA identified and notified     mation and instructed our members
the latest letter were raised by         our members about immediately          how to fix the problem.
UFAA.                                    rather than waiting more than 10            Hardly "unfounded" rumors. And
     Viruses – They said, "To think      days like they did.                    our intentions were to help our
that Farmers would intentionally              The message screen also           members, which is exactly what we
'send' a virus to the field is just      advised agents that it was safe to     did. And never once did UFAA say
incredible. Again, a rumor designed      use the virus-infected CD as long as   that the virus was sent intentionally.
to hurt Farmers." Instead of saying,     it wasn't downloaded — an incredi-          Fair Access Agent Training –
"Unfortunately, mixed with real          ble piece of bad advice. UFAA noti-    It's about time they admitted why
issues are unfounded [emphasis           fied our members immediately to        agents are being harassed to take a
added] rumors, which appear to be        not use the CD under any circum-       25-question, self-correcting test.
designed to damage Farmers," they        stances.                               They say, "The program was devel-
might admit the truth.                        The message screen also said      oped in response to allegations of
     We did say the first training CD-   the "Code Red II" virus attacked the   discrimination by Farmers agents
ROM for Biznet contained a virus.        Farmers network and affected the       [emphasis added] in the quoting of
And it did. On Feb. 13, 2001, the        Dashboard. Recently about 20
Farmers Marketing Message Screen         agents called UFAA Technology                  Continued on p. 24


                                                    Advertisement



             Markets - Markets - Markets
                                             (Yes, HOB markets too!)

                          Are you frustrated that you can’t be competitive?
                 Do you need markets for personal lines as well as commercial lines?
          Insurance Network of Texas is a $50-million multilines agency that has been in
       business since 1949 and is committed to meeting the insurance needs of your client.
           We build relationships on trust and deliver tailored service through dedication,
             technology, teamwork and experience. We will contribute our experience,
                   facilities and energies toward the achievement of your goals.
            The Special Sales Division offers you more markets to build your client base
          while allowing you to retain current clients. By offering you standard markets for
    personal lines as well as standard markets in commercial, we give you the edge needed
      to attract and retain good quality business. We provide CLUE, MVR and credit scoring
    at no charge to you as well as a very competitive rating package that keeps you one step
           ahead of your competition. We offer a very competitive commission structure.
      Please give us a call at 800-529-5180 and ask for Loretta Lewis or Rhonda Graham
     or e-mail us at lorettal@intonline.com or rhondag@intonline.com. We’d like to give you
   additional information on the many opportunities available with Insurance Network of Texas.
                                  (Applicable to Texas agents only)



                                             The Voice • 23 • Spring ’02
‘Dear colleagues,’                                                                             Continued from p. 23

insurance." The Associated Press         announced the commission cut,           on the recommendation of that
quoted Ohio Attorney General Betty       Marty came back with, "They did         anonymous alleged, "outside con-
Montgomery as saying, "Farmers           what they thought was right at the      sulting firm." There is the truth.
Insurance Group will pay $4.3 mil-       time." and rescinded the cut.                Get out your copy of the letter
lion to settle an Ohio case that              They also said they have hired     and enjoy reading it again!
claimed the company refused to           an outside consulting firm to con-
insure [emphasis added] homeown-         duct a "study of agent commis-
ers in minority neighborhoods..."
That seems to be two, somewhat
                                         sions." I would bet that every agent
                                         reading that letter knows exactly
                                                                                 Elections!
different, interpretations of what       what that "outside consultant" will          At the National Convention in
happened.                                recommend – and it won’t be an          June, National Board elections
     And, according to the               increase in commissions!                will be held for President,
Associated Press, the problem                 "One of our core values is         Secretary, Director of Media
stemmed from underwriting rules          'Trust.'" The virus problem was not a   Relations, Director of Legal
that prevented agents from adding        "rumor." It was real. If the Fair       Affairs, and Board Director at
replacement cost coverage to             Access test was a settlement condi-     Large. It's an honor and privilege
homes built prior to 1950.               tion, the Company chose not to dis-     to serve the Association, but it’s
     Fire Commissions – "We do           close that fact, but you can thank      also work. Who you would like to
not anticipate a commission change       UFAA for letting you know the "rest     see on your National Board?
in the near future." That's a pleasant   of the story" not previously divulged        For more information, contact
and appreciated surprise. But, as        to the agency force until UFAA dis-     the UFAA National Office or one
we all know, not all of their "promis-   covered the case.                       of the current National Board
es" are kept.                                 I would be very surprised if the   members.
     And when they originally            fire commissions were not cut based




                              Connectivity
                              ad


                                             The Voice • 24 • Spring ’02
Letters to the
  editor

Will the Company actually terminate                                The short answer is that until someone is terminat-
                                                              ed for writing the HO-B instead of the HO-A, and that
an agent for writing an HO-B?                                 person files suit for wrongful termination and the case is
     The new homeowners issue in Texas is big! The            decided in court, you cannot answer the question of
company apparently has instructed the DMs to put the          whether it is legal or not. Farmers can threaten you, and
word out that writing the HO-B form with other carriers       you have to decide what chances you are willing to take
is no longer allowed. Their explanation is that the HO-A      and how strongly you believe in your position.
form, with their new TX0040 endorsement, is close                  If you continue to write the HO-B, you are going
enough to an HO-B that even though the HO-B is an             directly against what the company wants you to do. The
ineligible policy, they are going to consider it a contract   company’s interpretation in this situation is a departure
violation if you place an HO-B with another company.          from the past because they want the premium but not
     The Enhanced HO-A is an untested named peril             the risk.
policy. Several obvious coverages have been removed.               Are you willing to expose your customers to a few
It approaches an HO-B, but it is not an HO-B.                 losses to keep the company happy? Can you defend
     An HOB is an "all risk" policy that grants more cov-     yourself if you write an HO-A and the customer sues
erage. The "all risk" aspect of the policy absorbed a lot     you because their loss would have been covered under
of losses you cannot name. It is tested, and claims           an HO-B? Since you intentionally wrote an HO-A, will
determination is a matter of practice and law. Even with      your E&O consider it an intentional act and deny the
mold and water damage limitations, it provides more           claim for the unpaid loss? Are you sure? Are you sure
coverage than the Enhanced HO-A.                              you know what the coverage differences are? Will your
     An agent is responsible to the company to place all      explanation to your customer keep you out of court?
"eligible" business. An agent also is responsible to seek          It will be interesting to see if the company will actu-
proper coverage for their insureds. Since the HO-B is         ally terminate an agent for writing an HO-B. It will be
ineligible, why must it be treated as eligible? It seems      interesting to see if that agent has the strength,
the agent is in an old-fashioned taffy pull on this one.      courage, and resources to file a suit for wrongful termi-
The company may be putting the policyholders at risk          nation.
by economically forcing agents to place them on a
reduced-coverage contract.                                                                              – A Texas agent
     If both policies are explained, and the customer
requests the HO-B, even with the restrictions for mold,
what do you do? You obviously must try your best to get
that customer an HO-B. Do you place it outside? If you        The Voice welcomes letters to the editor. Submissions
do, Farmers may cancel your contract. Your DM is more         should be sent to the Director of Media Relations at
than likely going to make life rough for you to try and       ufaa@aol.com. Letters must be signed, but the names
force you into line. Is that legal?                           of writers will be held on request.

                                             The Voice • 25 • Spring ’02
           A brief history
               of the




                                                                                       FARME R S




                                                                                                                   C I ATION
          United Farmers
                                                                                             A




                                                                                                              SO
         Agents Association                                                                        G EN
                                                                                                          TS A S

                 Second in a series of articles tracing the history of UFAA
                                            (continued in next issue)

   This history is offered in the sincere hope that it will help the reader understand the issues that made
UFAA necessary and the progress UFAA has made to help the independent contractor Agent succeed.

                                                      ❖❖❖

    I believe there are more instances of the abridgement of the freedom of the people by gradual and silent
encroachments of those in power, than by violent and sudden usurpations. ... This danger ought to be wisely guard-
ed against.
                                                                                                — James Madison
                                                      ❖❖❖

The Company reneges
     In its NLRB testimony, the company had asserted that agents owned their agencies, that they could
sell them to anyone, and that they could leave their agencies and compete against the company. In
1982, however, the company reinterpreted the Buff contract to say that an agent was required to transfer
all interest in an agency after receiving contract value from the company.
    The company began fighting departing agents for their agencies, and agents filed lawsuits in
response. Membership in UFAA began to swell rapidly again and U FA A Treasurer Carl Wyatt struck
upon the idea of collecting membership dues by automatic bank withdrawal, a move that permanently
stabilized membership retention.
     The company found the Buff contract usually did not stand up to judicial scrutiny. Agents were regu-
larly receiving huge damage awards for the company's confiscatory policies. In one case, the Oklahoma
Supreme Court acidly observed: "The best interests of the people of Oklahoma are not best served by a
marketplace of cutthroat business dealings where the law of the jungle is thinly clad in contractual lace."
     As a result of the judgments in favor of agents, the company introduced a new contract in 1984 that
redefined policy ownership in favor of the company. Agents were enticed with contract value loans from
the credit union and contract value bonuses tied to auto profitability - available only to those who signed
the new contract. Most agents gave up the security of owning their own business for the short-term ben-
efit of additional small bonuses.

LUA, PCM, DARG
    In the early 1980s, agents began forcefully questioning the company's 1971 policy of limiting the
underwriting authority of agents whose agencies experienced too many auto losses. Agents pointed out
that the company sets the underwriting rules and formulates premiums and that the agent cannot over-
rule them. Furthermore, the company accepts or declines applications, based on its own analysis. Some
professed to be confused why the company would terminate an agent for unprofitability, yet would vigor-
ously fight to keep the agent from taking the unprofitable business with him.

                                           The Voice • 26 • Spring ’02
    Minnesota UFAA members took the Limited Underwriting Authority issue to state lawmakers in 1986,
and both houses of the legislature banned terminations for loss ratio and revocations of agent underwrit-
ing authority. In June of 1989, Nevada UFAA members convinced lawmakers to pass the same law, and
the legislation began to spread to other states.
    By the spring of 1994, the company had announced L U A was being discontinued but was moving
to replace it with the Profit Center Management program. The choice of names confirmed the company
saw agents as something less than "Partners in Pride," but the fact that the new program did not auto-
matically restrict an agent's binding authority was seen as a step in the right direction.
    The company had sharpened its focus on "unproductive" agents in 1992 with the introduction of the
Priority Agent program, which set production requirements for agents and pressured them to sign a
statement that if they failed to meet those quotas they would resign. The darker side of the drive
emerged almost simultaneously with distribution of the Deteriorating Agency Rehabilitation.
    Guidelines, which singled out agents who showed, by company measures, an overall deterioration in
agency operation. DARG gave agents six months to get production up to an "acceptable" level and tried
to get them to sign a letter agreeing to the new production "goals." If the agent failed to meet the quotas,
the company would send a 90-day termination notice, and the agent would have little recourse because
the signed goal statement gave it the status of a legal addendum to the Agent Appointment.
    U FA A immediately organized a campaign to inform agents about the DARG program and how it
was being implemented against many long-time agents. UFAA gathered information from all over the
country as to how agents could best protect their interests. Members were counseled to become as pro-
fessional as possible and work hard to write a good, profitable business that included life sales.
Chapters were advised to retain local lawyers to defend their rights under the Agent Appointment
Agreement.




                           ABS ad



                                         The Voice • 27 • Spring ’02
                                                                   UNITED FARMERS AGENTS ASSOCIATION
FARME R S




                                          C I ATION




                                                                                                                                                                 FARME R S




                                                                                                                                                                                             C I ATION
                                                                               8978 Watson Road, Suite C
                                                                                  St. Louis, MO 63119
      A                            SO                                                                                                                                  A




                                                                                                                                                                                        SO
            G EN
                          TS A S                                         Office Hours: 9 am to 5 pm Central Time                                                             G EN
                                                                                                                                                                                    TS A S

                                                                                   E-mail: ufaa@aol.com
    Phone: 314-729-0727                                                         For Members: 800-275-8668                                            Fax: 314-729-0598


                                                                                    Executive Board
President—Ralph Buchanan                                                     Vice President—Don Green                         Secretary—Jim Beemer
2146 W Remington                                                             1612 N Lee Trevino, #D                           2705 10th St
Chandler, AZ 85248                                                           El Paso, TX 79936                                Greeley, CO 80631
(P) 888-765-4649 (F) 480-726-2515                                            (P) 888-440-8322 (F) 915-593-2826                (P) 970-356-3252 (F) 970-353-6134
E-mail: rgbuch@aol.com                                                       E-mail: dgiaep@zianet.com                        E-mail: jbeem356@aol.com
Treasurer—Tom Schrader                                                       Membership Director—Steve Hooper                 Director at Large—Steve Lenard
11338 Shawnee Mission Parkway                                                37 5th Street E, #202                            13313 S W Freeway #215
Shawnee Mission, KS 66203                                                    Kalispell, MT 59901                              Sugarland, TX 77478
(P) 913-631-1202 (F) 913-631-1201                                            (P) toll-free 866-756-8401 (F) 406-257-5190      (P) 281-242-0070 (F) 281-242-6818
E-mail: tomsins@toto.net                                                     E-mail: hooper@digisys.net                       E-mail: slenard@pdq.net
Legal Activities—Larry Tencer                                                Governmental Affairs—Mark Martin                 Media Relations—
450 Lakeville St, Ste D                                                      2115 Calder
Petaluma, CA 94952                                                           Beaumont, TX 77701
(P) 888-763-5300 (F) 707-763-7084                                            (P) 409-833-0006 (F) 409-833-2392
E-mail: larryten@aol.com                                                     E-mail: mark829@hotmail.com

                                   UFAA Technology Services—800-275-8668         UFAA Historian—Allen Yerxa (P) 303-424-5068 (F) 303-424-1875 E-mail: yerxa@qwest.net
                                                                                                                                                                                         03/02


                                                                                 Chapter Presidents
ARKANSAS                                                                     ILLINOIS                                         OKLAHOMA
(30) Bill Miller, Little Rock 501-223-2661                                   (21) Owen McAteer, Oak Forest 708-535-1833       (12) Chuck Penwright, Yukon 405-354-5371
(31) Deanna Parks, Barling, 501-452-6491                                     INDIANA                                          (15) Mike Gately, Tulsa 918-481-3277
                                                                             (18) Lee Linton, Indianapolis 317-780-1349       OREGON
ARIZONA
                                                                             KANSAS                                           (14) Merle Johnson, Wilsonville 503-682-1583
(16) Richard McDonald, Tucson 520-721-9300
                                                                             (13) Chuck Simpson, Kansas City 913-788-3110
(43) Dan Rahmatulla, Phoenix 602-973-3988                                                                                     SOUTH & NORTH DAKOTA
                                                                             MICHIGAN
CALIFORNIA                                                                   (45) Dave Arbanas, Wyoming 616-531-9070          (52) Loretta Berg, Sioux Falls 605-338-1247
(01) Jeff Ryan, Sacramento 916-349-2203                                      MINNESOTA                                        TEXAS
(02) Victor Acevedo, Daly City 650-994-1791                                  (17) Kevin Post, Glencoe 320-864-3914            (33) Armando Gonzalez, El Paso 915-594-4641
(04) Mark von Kronemann, Newbury Park 805-499-2418                           MISSOURI                                         (34) Joe Brown, Fort Worth 817-926-1598
(05) Jan Neveu, Van Nuys 818-785-2147                                        (41) Paul Juergens, Sullivan 573-468-4252        (35) Gwen Foster, Houston 713-961-9455
(06) Dave Gathings, San Bernardino 909-885-1214                              MONTANA - WYOMING                                (36) Ed Cuellar, San Antonio 210-647-7112
(08) Bob Jasak, San Diego 619-464-8588                                       (51) Klaas Tuininga, Bozeman 406-587-0765        (37) Dale Moon, Houston 281-484-8320
(10) Giovanni Zappetta, Vacaville 707-446-1140                               NEBRASKA - IOWA                                  (38) Mark Greenwood, Abilene 915-677-5200
                                                                             (19) Jeffrey Acklie, Omaha 402-391-1979
COLORADO                                                                                                                      UTAH
                                                                             NEVADA
(27) Roxye Santorno, Wheat Ridge 303-940-3233                                                                                 (39) Wayne Janssen, Salt Lake City 801-272-6702
                                                                             (26) Jeff Hubbard, Las Vegas 702-871-0771
(29) Mark O’Donnell, Colorado Springs 719-635-5454                                                                            WASHINGTON
                                                                             NEW MEXICO
(46) Bernie Clark, Greeley 970-353-2208                                                                                       (22) Steve Hall, Everett 425-743-1122
                                                                             (24) John Burlingame, Albuquerque 505-884-5996
IDAHO                                                                        OHIO                                             WISCONSIN
(28) Dean Mayes Jr., Meridian 208-888-3321                                   (44) Bernie McGuire, Fairfield 513-829-7222      (20) Ron Mikesell, Menomonie 715-235-6588

                                                      For information, contact the Chapter President nearest you or any Board Member
                                                                        Visit our website — www.ufaa.com

                                                                                                                                                       NON-PROFIT ORG.
            FARME R S




                                        C I ATION




                                                                                                                                                         U.S. POSTAGE
                  A                                                                                                                                           PAID
                                   SO




                        G EN
                               TS A S
                                                                                                                                                       LITTLE ROCK, AR
                                                                                                                                                         PERMIT #2001

             8978 Watson Road, Suite C
             St. Louis, MO 63119

             Address
             Service Requested

								
To top