Faced with attrition in its captive agencies, and decliningnumber of policies-in-force, Allstate Corp. is turning to asurprising distribution source to drive its brand: independentagents.

The Northbrook, Ill.-based carrier is circulating promotionalmaterial directed at independent agents, telling them there are 10reasons to “seriously consider Allstate” as a company they shouldrepresent. The letter notes Allstate's stability, rating strength,longevity, customer and claims service ability, and brandrecognition.

The promotional letter says the company gives agentsopportunities to build insurance packages with the insurer's 13lines of available insurance.

Allstate circulated the promotional material—which includesbrochures on Allstate Auto and Homeowners coverage—during therecent meeting of the Independent Insurance Agents & Brokers ofAmerica in Washington D.C. When asked about the material at themeeting, an Allstate executive indicated the company would beannouncing an initiative sometime in June.

“Allstate has worked with independent agents since 1974,” saysAllstate spokeswoman April Eaton in an email sent toPC360. “Allstate continually evaluates marketopportunities to ensure that customers are able to do business withus how, when and where they want to, including through a localAllstate [independent agents].”

Eaton says Allstate has 1,700 independent agency-ownerslocated in rural markets. She says Allstate “willconsider appointing independent agency owners only in rural marketswhere we do not deploy exclusive agents. We want our currentindependent agenices to grow with us.”

The company also has its Encompass brand that sells personallines and small-business insurance exclusively through independentagents. However, Jim Fish, executive director of the NationalAssociation of Professional Allstate Agents, says the distributedmaterial does appear to be a new recruiting effort by Allstate tosell a brand of products that had been the domain of captive agentsin urban areas.

Fish says Allstate has seen its number of captive agents declineand may be attempting to shore up its market by seeking growththrough independent agents, and their established book of business.He says the Allstate brand has watched the number of policies inforce (PIF) decline and has not had much luck growing its book ofbusiness.

According to filings with the U.S. Securities and ExchangeCommission, Allstate said its policies-in-force for Standard Autodropped from 17.5 million in 2010 to 16.9 million in 2012, and fellanother 79,000 by the end of the 2013 first quarter.

Non-Standard Auto policies fell from 640,000 in 2010 to 508,000in 2012. In Homeowners, the number has dropped from 6.7 million PIFin 2010 to 5.97 million in 2012.

On the other hand, Allstate's independent agent brand has grown,as has its online auto brand—Esurance—over the same period. InStandard Auto, for instance, Encompass went from 689,000 PIF in2010 to 708,000. Esurance, a direct-to-consumerinsurer, grew from 786,000 to 1.03 million during that sameperiod.

Allstate attributes its PIF declines in Allstate StandardAuto to “fewer policies available” on the auto side and, inpart, the cessation of writing Homeowners in coastal areas incertain states.

Fish argues that Allstate's main problem is the company'scompensation structure. Allstate has cut its commissions to itscaptive agents to 9 percent, but increased incentive payments.Meanwhile, Allstate raised independent-agent commissions to 15percent, Fish says. Another advantage for Allstate's turn toindependent agents, Fish adds, is the insurer can connect with amature book of business instead of investing in the development ofnew agents.

Eaton says the commissions for independent agents have been thesame since 2005.

Last year, in the company's annual report, Allstate said the number of its exclusive agentsfell from 11,500 in 2010 to 10,000 in 2011. In the company's mostrecent 10-K filing, Allstate says it has approximately9,300 exclusive agencies in approximately 9,000 locations. Eatonadds, “Exclusive-agency retention is at the highest level we'veexperienced in recent history.”

During a recent call with financial analysts discussing thecompany's Q1 results, CEO Thomas J. Wilson dismissed any speculation that the company's decline in thenumber of captive agents has anything to do with its newcompensation structure. Matthew Winter, president of Allstate Auto,Home and Agencies added that the reduction in agents was notnecessarily unintended in some cases.

In a transcript of the Q1 call, Winter says thecompany is “seeing a stabilization of agency numbers” and adds “wehave a large initiative underway to not only grow the number ofagencies, but to grow the number of licensed sales professionals,which is working quite well right now.”

Fish says Allstate needs to explain its plans to its captivemembers and he intends to bring up the issue at the company'sstockholders meeting.

“I'll be asking them some questions,” he says.