Can an insurance agent raise rates or commisions on pre-existing property insurance?

Question

Hey BP,

How much control does a St ate f arm Agent have in rate increases, on property insurance? Can they raise their commissions on exisisting policys?

Thanks, John

Donald Stevens · Answer

My brother works for State Farm and he says they pay a flat rate and with State Farm the agent is almost like an employee of the company. They do not have any control over rates, only discounts. State Farm does fluctuate from time to time so it may just be time for an increase. Also the insurance market is "hardening" which means most people, state farm or not, are going to start seeing rate increases on all types of insurance. Its the nature of the beast, they go really low to win business, then adjust up to stop losing money once the claims come in.

Duncan Taylor · Answer

I'm not sure I fully understand your question but I do know quite a bit about State Farm agents. It is probably similar across all insurance companies.

The rates you get will vary depending on the State Farm agent you use. There are a lot of factors that play into that but it basically comes down to how risky their particular book of business is. Newer agents will often have higher rates than the old guys out there. The exception is a new guy who steps into the book of business from a retiring agent.

More experienced agents also have more leeway in how risks are classified. A simple tweak from the agent and his choice of rate pool for your policy can make a huge difference in rates.

The amount of current business you have with them and the claim history makes a big difference too.

The best advice if you are not already a State Farm customer is to call around and just ask for a ballpark quote on the phone. You won't have to give much information beyond the value, location and age of the property. These are non-binding quotes but you are really just trying to find the right agent at this point.

Hope that helps.

Duncan Taylor · Answer

If my agent told me he didn't know why my rates changed, I'd tell him I would be calling back in an hour to give him time to find out. If it was still, "I don't know," I'd let him know I was going to shop all of my policies around with other insurers.

"I don't know" just screams rank amateur.

"I don't know yet but let me find out" would've been better.

All I can tell you is if any of our policies had steep increases like that, and some have, we'd get a call from the agent AND our representative at the home office before the bill went out. Part of an agents' job is to be proactive and not let their customer be surprised.

Andrew Bosworth · Answer

John,

Is your agent an independent agent or direct writer for a particular carrier?  Were your rates changed mid-term?

As you probably know, rates are subject to change at renewal or if coverage changes are made (new property added, liability changes, etc.) during the policy period.  I am less familiar with a direct writer, but in the case of an independent agent, they do not have sole authority to change rates.  This is ultimately determined by the insurance company (underwriting).  An agent may make a request to the insurance company to raise or lower rates in order to be competitive, but this does not mean that the insurance company will comply with an agent's premium request.

If you are concerned, I would suggest asking your agent to give you an explanation of the premium increase.

Eric Belgau · Answer

There are a couple of issues at play here.

First, Duncan is right.  A book of business does affect the premiums you get from underwriters, especially when you're a captive agent - selling for one brand, like State Farm.

Different agents also view their job in different ways.  Half the job is selling policies to clients, and the other half is selling risks to underwriters.  Agents who specialize in selling policies often sell less to their underwriters, and the rates suffer as a result.

But if you have an established relationship with an agent (meaning you've had your business with them for some time) and you suddenly get a big rate increase without any claims during the preceding year, it's probably because the insurer changed its guidelines.  It's very tempting (and convenient) to go after you agent over the rate increase, but those don't happen because agents want to make a buck.

Wayne Brooks · Answer

Never heard of it.  The rate, which includes and sets the commission, are set by state farm, not the agent.

Andy Collins · Answer

One thing beyond anyone's control on rates are losses,,in Texas we get bad hail storms from time to time, when they come through you start seeing new roofs going on,,if a storm hits a particular area you can see 30%+ of the homes on a street getting new roofs, and that usually means the same thing for  that entire neighborhood.

When that happens, you check your roofs, and if they are damaged get a new one (paid for by insurance),,even if you don't have a loss you know your rates will go up the next year because of the money insurance companies shell out for all those roofs.

Duncan Taylor · Answer

Yes, that is why I am so grateful every single day for my assistant. She has been with me for close to 25 years. I joke about having to retire when she does because I probably won't be able to function without her.

But, sometimes we have to push through something unpleasant, like switching insurance to keep on track with the bigger picture.

John Adamkewitz · Answer

Hey Duncan and Wayne,

I purchased property insurance in 2012, for a 4-unit rental I own.  the original quote and purchase was around $1400 per year, which I  didn't think was a bad price. I've been with this company with multiple policys for about 6  years. No claims.

By the end of 2013 the rate was raised  twice, until it came in at $2150. no explanations, just pay more. I  called My agent and asked why, He really "didn't know" which was an  unsatisfactory answer to Me. I shopped and found the same coverage with a  smaller local company for $1625 per year, and then did not renew the  one policy when it expired. I did call and tell My agent before hand  to let them know. Two months later My existing Homeowners  (Personal Residence) comes due and I find a 14% increase for that  policy. I have had no claims and My credit score is in the mid 700's,  I'm not in a flood area. I see no new risk.

I just need to know if the agent is behind the increase or it's the company.

Because if it were the agent, I would switch All My insurance elsewhere, but what a major pita that would be.

Thanks, John

Can an insurance agent raise rates or commisions on pre-existing property insurance?

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