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Letter to the Editor, Chicago Tribune
January 30, 2010
RE: Allstate May Shed 20% of its Agents
Hometown favorite Allstate Insurance is embroiled in a nasty PR battle with its own agents that were at one time employees. In 2000, Allstate fired all of its agent/employees and rehired them as alleged independent contractors and herein begins the controversy.
By ‘firing’ its employee agents, Allstate realized significant tax advantages by not having to pay the employer’s portion of Medicare and Social Security taxes and rid itself other employee-related costs. The company then ‘rehired’ these same agents as independent contractors and shifted all its employee-related taxes and expenses to the agent. To accomplish this, however, Allstate had to promise the IRS that these independent contractor agents would be truly independent and that it could no longer control how they ran their agencies. Allstate also assured the IRS that it would not impose production quotas, or exert other employee-like controls over its agents.
Today, the understandable ire being expressed by many agents is due to the fact that the company has yet to keep up its end of the bargain with the IRS. Apparently, it never had any intention of doing so. Nearly all of the things Allstate promised the IRS that it would not do have continued unabated. In addition, the company has introduced even more onerous employee-like controls. In short, the company has gotten to have its cake and eat it too.
Over time, Allstate may trim up to 3,300 agent jobs – jettisoning many long-serving, loyal agents with excellent customer retention and loss ratios – a move seen by many as a ploy to confiscate agent renewal commissions to shore up the company’s deteriorating bottom line.
Meanwhile, the passive Allstate Board of Directors appears to be a spectator by allowing Mr. Wilson and his minions to recklessly dismantle arguably the best agency force in America.
Sincerely,
Jim Fish
Executive Director
National Association of Professional Allstate Agents