The Building Blocks of the Farmers Insurance Group of Companies

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1 Introduction In this section, you ll learn about the Farmers Insurance Group of Companies. We ll start with Farmers history and explain our organizational structure. You ll gain an understanding of the relationship between Farmers Group, Inc., the management company of the Farmers companies, as well as the Exchanges and their reciprocal structure. We ll conclude with an overview of the company s management and support staff. Learning Objectives Once you ve completed this section, you ll be able to: Understand the Farmers Insurance Group of Companies Understand the organizational structure and the meaning of a reciprocal or interinsurance exchange Be able to name the companies, subsidiaries and exchanges, as well as their subsidiaries that make up the Farmers Insurance Group of Companies Understand the components of management and the support structure The Building Blocks of the Farmers Insurance Group of Companies Farmers Insurance Group of Companies is based in the Los Angeles County and operates in 50 states across the country through the efforts of approximately 50,000 exclusive and independent agents and nearly 24,000 employees. Our agents and employees together create the Farmers Insurance Group of Companies. This service network provides superior insurance and financial solutions through more than 20 million policies of insurance. Corporate Structure of the Farmers Exchanges Farmers corporate structure, although unique, has been in place since our beginning and continues to provide a strong framework into our future. In 1928, Farmers Insurance Exchange was formed to sell auto insurance primarily to rural drivers in California, many of whom were farmers. As customer demand for additional insurance services increased, the Truck Insurance Exchange and Fire Insurance Exchange, founded in 1935 and 1942 respectively, were 1 9/2015

2 established to serve customers commercial and home insurance needs. These three insurance Exchanges still exist today. These Exchanges are referred to as reciprocal insurers or interinsurance exchanges. This means that they consist of policyholders or subscribers who exchange contracts with one another so that they can provide themselves with insurance against certain losses. In order to have an insurance policy through any of the Farmers Exchanges, a policyholder must become a Subscriber (or a member) of that Exchange. The Subscription Agreement is the agreement with the policyholder to become a Subscriber; each Exchange has a separate form of the Subscription Agreement. Prospect applies for insurance Subscription Agreement signed Policyholder becomes a Subscriber Under the Subscription Agreement, the Subscribers appoint the Attorney-in-Fact to perform certain operations for the Exchange. These operations include, but are not limited to, the collection of premiums, issuing and canceling policies and securing reinsurance. The Subscription Agreement also describes the fee to be paid to the Attorney-in-Fact, which is a percentage of all premiums (new and renewal) and the membership fee. There is no additional or separate cost to the Subscriber. Complete the Subscription Agreement course in the University of Farmers Online for additional information on this important topic. 2 9/2015

3 Farmers Insurance Exchange Truck Insurance Exchange Fire Insurance Exchange Managed by Farmers Group, Inc., dba Farmers Underwriters Association (Attorneyin-Fact) Managed by Truck Underwriters Association (Attorneyin-Fact) Managed by Fire Underwriters Association (Attorneyin-Fact) Attorney-in-Fact appointed by Subscribers Paid a % of premium and membership fees Attorney-in-Fact appointed by Subscribers Paid a % of premium and membership fees Attorney-in-Fact appointed by Subscribers Paid a % of premium and membership fees Farmers Group, Inc., doing business as Farmers Underwriters Association, is the Attorney-in-Fact for Farmers Insurance Exchange. Farmers Group, Inc., along with its wholly owned subsidiaries, Truck Underwriters Association and Fire Underwriters Association (the Attorneys-in-Fact for Truck Insurance Exchange and Fire Insurance Exchange), are commonly referred to as the Management Company or Farmers Management Services. The Attorneys-in-Fact provides the Exchanges with operational services including actuarial, legal, marketing, accounting and underwriting, but not claims. It s important to note that the Management Company does not own the Exchanges it provides these operational services for a fee. The Exchanges have grown significantly since their formation many years ago. Farmers Insurance Exchange is now the world s largest reciprocal insurer. The Exchanges have also grown through the formation and acquisition of subsidiary insurance companies. The first subsidiary was Mid-Century Insurance Company, which was organized and licensed in A series of local insurers were also formed by the Exchanges, primarily in the early 1970 s. Those companies were formed to take advantage of domestic state laws, and collectively are often referred to as the Domestics. Since 2000, the Exchanges have also grown through acquisition. The Foremost Insurance Group was acquired in Based in Grand Rapids, Michigan, Foremost became the Farmers Specialty carrier, and introduced the organization s use of Independent Agents. The Bristol West Group, a non-standard auto group, was acquired in 2007, and the Zurich Small Business Solutions Group was acquired in In 2009, the Farmers distribution system was extended to the direct market with the acquisition of the 21st Century Insurance Group. 3 9/2015

4 Foremost, Bristol West, Zurich Small Business and 21st Century have all been integrated into the Exchanges and, along with the Domestics and the Exchanges, comprise the Farmers Insurance Group of Companies. You will often hear our employees and agents refer to the Exchanges and their Attorneys-in-Fact as simply Farmers. Farmers is a trade name used by various related entities, including the Exchanges, their subsidiaries and the Management Company. To help you understand the Exchange and Management Company relationship in the broader Farmers and Zurich organization, the chart that follows shows simplified ownership and management relationships. 4 9/2015

5 Our Vision Statement We aim to be the best U.S. multi-line insurance provider by clearly understanding and anticipating our customers' needs and exceeding their expectations. We want to have the most talented and dedicated team members, who challenge the norm and strive to be better every day. 5 9/2015

6 Here are some line of business and departments to be aware of: Auto and Homeowners insurance Today, the Farmers Insurance Group of Companies is one of the country s largest group of writers of Personal Lines Property and Casualty insurance. As indicated above, Foremost, Bristol West, and 21st Century have all been integrated into the Exchanges and, along with the Domestics and the Exchanges themselves, comprise the Farmers Insurance Group of Companies. Life insurance Farmers New World Life Insurance Company (FNWL), a subsidiary of Farmers Group, Inc. (making Farmers Group, Inc., an insurance holding company as well as a management company), is headquartered in Mercer Island, Washington and has a proud history dating back to FNWL became a member of the Farmers Insurance Group of Companies in 1953 and offers a wide range of products, including a fully flexible Universal Life product, traditional Term and Whole Life plans as well as annuities marketed by Farmers agents. Mobile home, marine and recreational vehicles Foremost Insurance Group, located in Caledonia, Michigan, was acquired by the Exchanges in March Foremost leads the industry in insuring specialty products such as mobile and manufactured homes, boats and personal watercraft, motor homes, travel trailers and off-road vehicles, as well as specialty dwelling homes that don t qualify for Standard or Preferred Homeowners coverage. Bristol West Automobile Insurance Effective July, 2007, Bristol West Insurance Group was acquired and became a part of the Farmers Insurance Group of Companies. Bristol West brings industry-leading experience and expertise in the non-standard Auto market. It began providing private passenger Auto insurance to Florida residents in 1973, and since that time, it has grown to be a leading provider of liability and physical damage insurance focusing exclusively on private passenger vehicles across the United States. Bristol West insurance products provide customers a comprehensive range of non-standard Auto insurance overages at competitive prices. 21st Century In July 2009, the 3rd largest direct writer of insurance at the time joined the Farmers Insurance Group of Companies. 21st Century brings a new distribution channel to our customers. As an online marketplace, the acquisition of 21st Century provides Farmers with a geographically broader and more diverse market presence across the country a 6 9/2015

7 key target market for future Farmers growth. As of 2014, 21 st Century has been fully integrated and is now called Farmers. Small Business Insurance Farmers Business Insurance offers solutions to Small Business customers in 10 selected industries. Our business owner policy is a package of coverage tailored for each industry providing an opportunity for agencies to create a balanced approach within their book of business. Premium payment The Prematic Service Corporation (a subsidiary of Farmers Group, Inc.) was introduced in 1961 and for the first time, allowed Farmers customers the convenience of combining all Farmers policy premiums into one monthly payment. This program has seen many developments over the years and is now known as Farmers All-Lines Billing. Investments Farmers Financial Solutions, LLC, doing business as Farmers Financial Solutions (FFS), located in Agoura Hills, California, was created in Their goal is to provide financial services through investment and variable products that help our customers plan for their future financial needs. FFS is owned by the Exchanges and is a licensed broker-dealer. Claims Our Claim Department offers a state of the art claim system. It provides superior support, unparalleled in the industry, to customers when they need it most. Our Claims Contact Centers are staffed 24 hours a day, 365 days a year with skilled, experienced representatives who guide customers through the initial shock that inevitably follows a loss. The claim representative guides customers through the claims process, helping them to prioritize and address issues that arise from the claim. Management and Support Structure We also have a management and support structure that exists throughout our operating territory. It is made up of four operations: the Home Office, Service Operations, territory offices and district offices. These operations are also key resources of the Farmers Insurance Group of Companies available to help you serve your clients and accomplish the agency s goals. 7 9/2015

8 Home Office Farmers Home Office is located in Los Angeles County, California. Executive and senior level management, responsible for the top and bottom line business results, operate out of the Home Office. These management services are provided to the Exchanges in accordance with the Subscription Agreement (as discussed above). Management provides regular reports on Exchange business results to the Exchanges Boards of Governors. In addition to management, Home Office creates policy and procedure and provides the computer-based infrastructure for storing and managing information for the Farmers companies. Although Home Office is foundational to our organization, to an agency, the majority of your interactions will be with the Territory Office, Service Operations and District Office. Territory Offices The territory offices are responsible for all business results including premium, policy-inforce and life insurance growth, rates and profitability, as well as legislative and regulatory affairs within their operating territory. Each state in our operating territory is assigned to a territory office. In addition, territory offices provide support for the growth and success of agencies by offering guidance and training and by developing marketing programs and promotions. The territory office structure includes the following positions: Head of Territory - The Head of Territory has ultimate responsibility for all aspects of the territory office operations (noted above) and supervision of territory office personnel. Head of Sales - Responsible for sales results in the territory operation. Drives results through new business, policies in force (PIF) growth, increased agent productive capacity and initiatives (Agency & DM Platform). Reports to Head of Territory. Area Sales Manager - Responsible for designated area sales results. Reports to Head of Sales. And various positions to support product lines, recruiting and training efforts. Service Operations The primary goal of Service Operations is to provide agents and their staff with the support needed to deliver a superior customer experience. Service Operations demonstrates our commitment to operational excellence and our quest to excel in every aspect of taking care of our customers. Service Operations facilities are located in Kansas City, Kansas, Austin, Texas and Hillsboro, Oregon. 8 9/2015

9 Through the Service Operations model, agents can direct questions, issues and concerns regarding customers Personal Lines policies by dialing the toll-free number (888) FARMERS. Service Operations operates with extended business hours Monday through Friday, and is operational on Saturdays for some states. In addition to telephone inquiries, Service Requests can also be initiated by , fax and through the Agency Dashboard using the Create Service Request function. Whichever method of communication is chosen, service requests are directed to Service Operations. You can check the status of all requests for an agency through the Agency Dashboard and easily identify who is working on a request. You will learn how to use the Agency Dashboard s Service Request functionality as you progress with your training. Within Service Operations are Centers of Excellence that focus on various underwriting and policy processing transactions. Most of your transactions will be underwritten and issued electronically, while exceptions will be referred to the underwriters in the Centers of Excellence. You will also work with Service Operations advocates. These individuals know the policy processing and billing systems. They will assist with your inquiries or service requests regarding how to efficiently enter new policies, process policy changes, and answer billing questions. Customer loyalty is earned. Customers expect quick turnaround on their requests. They expect their requests to be done right, the first time. Service Operations helps you deliver on customer expectations. District Offices The district offices offer guidance and support for the agents within their specific district and are responsible for all sales results of the district. Specific focus is placed on: District policy and premium growth District profitability Agency training and development Recruitment of new agents Communication of new policies, coverage and programs District administration regulatory compliance and day-to-day operations Motivating and leading agency force Because of the above, the district office will be your primary source of information for what is occurring within the companies, state and your district. If you work in a territory that does not have district offices, contact your manager at the Territory Office. A graphic of our management and support structure is included below. 9 9/2015

10 In conclusion, we have covered some of the resources that support our many agencies. By understanding how these pieces fit together, the roles they play and how they can help, you ll be well prepared to help us grow and succeed. Note: Territory Office staff title and positions are subject to change. 10 9/2015