NU Online News Service, Nov. 1, 11:05 a.m.EST

Allstate Corp.'s chief executive says the compensation given toagencies is changing to give more money to agencies performing thebest.

Thomas J. Wilson, chairman, president and chief executiveofficer, says he understands the change will “obviously createconcern” for some agencies, but Allstate will not change the amountthey have given to agencies—only the manner in which the amount isdoled out.

In the past, compensation has been 10.7 percent of premiums,with 10 percent locked and a 0.7 percent bonus, or incentive, whichamounts to $200 million to $250 million per year.

Starting in 2013—a date moved back from the company's previousplans to change the compensation structure in mid-2012—compensationwill still be 10.7 percent but 8 percent will be locked in and 2.7percent will be given based on the performance of the agency.

During a conference call on the company's earnings, Wilson says agencies “don't need to jump over theGreat Wall of China to get the money.”

The Northbrook, Ill.-based insurer is encouraging largeragencies by giving loans for acquisitions in a move Wilson sayswill increase agency capabilities to serve customers better.

The size of Allstate's agencies has increased 10 percent since2009 but the overall number of agencies has decreased 14 percent,reports Wilson, adding that he expects “some agencies will beunhappy” with the changes but Allstate's goal is to “make as manyagencies that want to be successful, successful.”

“Their success is tied to our success,” Wilson says. “We're inthis together.” Allstate is not making the changes to create afight with agencies, he adds.

Wilson says the company elected to moved back the start-date ofthe compensation changes to “give a runway for agencies to adapt”to them.

The chief executive says he misspoke when he told an analystearlier in the call that agencies had the option to opt in to thenew compensation structure in July 2012. That option has beeneliminated, he says, due to lack of interest.

Wilson placed the blame for a decline in new auto insuranceapplications not on agents, but on the company's overall strategyto increase homeowners' insurance rates and reduce exposure in someless-profitable areas.

Allstate agents are going through big changes with the newcompensation structure and the integration of Esurance and Answer Financial, an acquisition completed duringthe third quarter. Some agencies joined together to acquireunion affiliation.

However, the agents will be counted on to generate business inorder for Allstate to meet its goal of 13 percent operating returnon equity by 2014.

Improving results in homeowners' insurance is vital, saysWilson. Average rate increases of nearly 14 percent were approvedin 15 states during the third quarter. As it looks to get rate,Wilson says Allstate has not gotten any trouble from regulators orcompetitors.

“We're all losing money,” he says.

Allstate has worked to increase the spread of its rate increases(a home in one area of a state might see rates go up slightly whileothers see a steeper increase) as the company work to improvepricing, particularly as it relates to roof damage cause by windand hail, Wilson says.

“The goal is to get returns up,” Wilson says. “We're going tokeep banging away as aggressively as we need to, to get returnsup.”