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The Great ALI Hoax - or how Allstate agents have been double-crossed
February 17, 2010, NAPAA Headquarters, Gulfport, MS
An Agency Loyalty Index (ALI) score below 60 three years in a row will result in agency contract termination. Management began to incorporate the survey results from 2007 and 2008 into the 2008 Agency Status Review (ASR). It is important to note that agents were completely unaware of the Agency Loyalty Index and/or its consequences until the company notified them of it on March 19, 2009. Needless to say, the two year "look back" caught the agency force off-guard and caused many to run to their customers in order to prep them on how they should answer three vital survey questions. With two strikes against them and less than six months to contact and coach their customers, only some succeeded while others failed. Agents with large books and marginal ALI scores, decried the short notice they were given and called the inclusion of prior year scores "an unfair ploy to terminate agents." And now their fears have been confirmed, as involuntary agent contract terminations, based on the October 2009 survey scores, have commenced.
In his comments in the fourth quarter earnings conference call on February 11, 2010, Tom Wilson told analysts that agents "that did not make the transition" [improved ALI scores] "are leaving the organization," which is corporate speak for "we're firing them." Other statements made to the press by Allstate spokespersons also subtly allude to the firings, as evidenced by the following remark made by Maryellen Thielen, "Some agencies may choose not to take this journey with us, but for agency owners committed to providing consistently superior levels of service, the opportunities have never been better to grow their agencies." Clearly, this is a public relations strategy designed to make it appear as though agents are being given a real choice when, in reality, the forced terminations are deliberate and part of the company's long-range plans. Make no mistake, agents are not choosing to leave the organization of their own free will and are not voluntarily opting out of Mr. Wilson's "journey." Instead, they are being forced out by intimidation tactics or are being issued 90 day written notices of termination.
Agency Loyalty Index (ALI) Revisited
The ALI is a harebrained idea that has little merit, but huge consequences for Allstate agents. The company, it seems, places more importance on ALI scores than it does on agency retention ratios. Indeed, rarely, if ever, are agents terminated for poor retention ratios, albeit that could change at any time.
The ALI score is calculated based on customer responses to three simple questions, which are paraphrased below:
1. "How satisfied are you with your Allstate agency?"
2. "How likely are you to renew your policy?"
3. "Have you recommended your Allstate agency to others?"
Every Allstate agency receives a score based on positive versus negative customer answers. No consideration is given to rate increases, competitive rate position, claim satisfaction, non-renewal of other lines of business, poor service from other departments, or any other factor that may influence customer answers, especially those in response to questions 2 and 3.
Who will receive the survey?
• Agents with less than 100 households are not included in the survey.
• Agents with 100 to 667 households: every customer receives the survey.
• Agents with more than 667 households: survey is sent randomly to 667 customers.
Only forty responses are required for the survey to be considered "Statistically Significant". The company considers forty responses to be an adequate measurement when determining an agent's success or failure at providing excellent customer service at the agency level, no matter how large the book.
What are positive, negative and neutral responses?
"How satisfied are you with your Allstate Agency?"
There are 5 possible answers to choose from:
• Positive Responses = Completely or Very satisfied
• Neutral Response = Somewhat satisfied
• Negative Responses = Not very satisfied or Not at all satisfied
"How likely are you to renew your policy?"
There are 4 possible answers available:
• Positive Response = Very likely
• Neutral Response = Somewhat likely
• Negative Responses = Not very or Not at all likely
"Have you recommended your Allstate agency to others?"
There are 4 possible answers available:
• Positive Responses = Yes or No, but willing to
• Negative Responses = No, would not offer opinion or Recommend against
• There are no neutral answers to this question
The Formula?
Here is the nonsensical mathematical formula contrived to calculate the Agency Loyalty Index (ALI):
ALI is the difference between the percent of "Loyal" customers and the percent of "At Risk" customers. A "Loyal" customer gives a positive response to all three questions. An "At Risk" customer has given a negative response to all three questions.
All other customers are categorized as "other" and are not included in the calculation of the ALI score.
Loyal Customer - At Risk Customer = ALI Score
Hypothetical Examples of ALI results:
Strike 1 - Joe Smith Agency (first year)
Total number of responses: 40
16 of 40 (40%) answered all 3 questions in the positive (Loyal Customers)
16 of 40 (40%) answered positive on "satisfied with agency," and negative or neutral on "renew" and "refer" questions.
8of 40 (20%) answered all three questions in the negative (At Risk Customers)
The ALI score is calculated by subtracting the percentage of "At Risk" customers (20%) from the "Loyal" customers (40%).
Loyalty Index score for this agency is 20, which is an unsatisfactory result
Strike 2 - Joe Smith Agency (second year)
Total number of responses: 40
26 of 40 (65%) answered all 3 questions in the positive (Loyal Customers)
4 of 40 (10%) answered positive on "satisfied with agency", and negative or neutral on the "renew" and "refer" questions.
10 of 40 (25%) answered all three questions in the negative. (At Risk Customers)
The ALI score is calculated by subtracting the percentage of "At Risk" customers (25%) from the "Loyal" customers (65%).
Joe Smith's Loyalty Index score for the second year has improved to 40, but the result is still below 60, which is unacceptable to Allstate management.
Strike 3 - Joe Smith Agency (third year)
Total number of responses: 100
10 of 100 (10%) answered all 3 questions in the positive (Loyal Customers)
85 of 100 (85%) answered 2 of the 3 questions positive, and the third either neutral or negative
5 of 100 (5%) answered all three questions in the negative (At Risk Customers)
The ALI score is calculated by subtracting the percentage of "At Risk" customers (5%) from the "Loyal" customers (10%). In the third year, more of Joe's customers responded to the survey, but 85% of their responses did not count toward the survey results.
Joe's Loyalty Index score for the third year was a paltry 5, well below the company's benchmark of 60.
Therefore, it only took five of Joe Smith's customers for the company to determine that he was no longer worthy to be an Allstate agent. As a consequence, Joe Smith received his notice of involuntary contract termination on February 1, 2010.
About National Association of Professional Allstate Agents (NAPAA)Based in Gulfport, Mississippi, NAPAA is a non-profit organization whose members are predominantly insurance agents under contract with Allstate. In addition to offering a variety of benefits and services, NAPAA further serves its members by acting on their behalf and speaking with a distinct and unfettered voice on a wide range of issues. To contact NAPAA, please visit its Website at www.napaausa.org or call (877) 269-3474.