Alfa Insurance Loses Customers

Shortly after killer tornadoes ravaged Alabama in April 2011, Montgomery-based Alfa Insurance announced it would not renew more than 70, 000 property insurance policies statewide in an effort to offset the impact of recurring weather-related claims.

Like other insurers, Alfa was attempting to get a handle on the cost of skyrocketing claims generated by years of catastrophic weather events. The majority of the Alfa policies that weren’t renewed were for rental properties owned by landlords, but some traditional homeowners, manufactured homes and fire policies were among those not renewed.

Alfa’s action soured many of its homeowner policyholders, one of whom was Chris Wynn, a Jackson County resident and owner of Millenium Machine in Scottsboro. “It didn’t sit well with me, ” Wynn says. “They told me it was because I hadn’t bundled my automobile insurance with my homeowners policy. There was nothing wrong with my house. I was making my payments. I wasn’t delinquent or anything.”

Wynn says looking for another homeowners carrier is like being out of work and looking for a job. “You get your insurance cancelled, and you go somewhere else to buy insurance, they don’t want to mess with you because you’ve been cancelled. It kind of puts you in a hard place, ” he says.

Wynn was far from alone; in fact, there were thousands in the same boat. But after Jimmy Parnell was elected president of Alfa last December, he wrote to 10, 000 former customers, including Wynn, asking them to come back to Alfa.

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In a personal letter to those customers, Parnell asked them to “give (Alfa) another chance … to demonstrate the values that made our company great.”

Wynn’s Alfa agent, Sherrill Garner, says the very nature of Wynn’s business structure prevented Alfa from writing insurance on his vehicles, which meant Wynn couldn’t bundle homeowners and auto policies. That led to the nonrenewal of his homeowners policy.

But as she did with many of her customers whose policies weren’t renewed, Garner took the time to find another policy for Wynn, in his case with a Michigan-based company. Garner made a commission on those policies but not nearly as much as she would have had it been an Alfa policy. Though a higher commission would have been welcome, Garner says customer relationships were more important.

“It was important for me to maintain relationships so that customers would keep coming through my door. So, I was glad to have the opportunity to help them find another policy.”

Wynn says the homeowners policy Garner found cost roughly twice what his Alfa policy had cost. So, when Alfa contacted him earlier this year and asked him to come back, “My first reaction was ‘You can take it and stick it in your ear, ’ ” Wynn says. “I felt like they had done me wrong, but then I stopped and thought about it, and it was easy to go back. Even if I was paying $1, 800 a year, I would still use Alfa, because they’re here and not up in Michigan somewhere.”

Wynn says he had been paying about $900 a year for his Alfa homeowners policy before the non-renewal, but he now pays about $1, 100. He also insures two personal vehicles now with Alfa under a different policy, having worked out the arrangement with Garner. “I’m satisfied, ” he says. “They’re nice people.”

Jeff Helms, director of public relations and communications at Alfa, says the company is contacting former customers strictly through Parnell’s letter and the efforts of Alfa agents, with no advertising or marketing efforts aimed specifically at wooing back former customers. Nor have sales quotas been assigned, he says.

Customers are returning, but not in droves. “We’re getting something like 20 or 30 a week, approaching 450 since Mr. Parnell’s letter went out, ” Helms said in late June.

“Some people were very moved by his letter, and when they came back, they say it was like coming home. There have been some other customers who says ‘No. No thanks.’ And we expected that.”

According to the Insurance Information Institute, Alfa has written less business and lost market share following its decision in 2011. In 2010, the company wrote $234 million in homeowners insurance in Alabama and had a 17.7 percent market share. Ranked first was State Farm, which wrote $372.3 million and had market share of 28.2 percent.

For 2012, Alfa wrote almost $16 million less in homeowners policies — $218.5 million — and its market share dropped to 14.8 percent. State Farm, on the other hand, wrote $439.6 million and had market share of 29.8 percent.

From the time Parnell took over as president late last year, his mantra has been “Find a way to say ‘yes’ to customers, ” Helms says. “Mr. Parnell truly believes, and all of us at Alfa believe, the strength of our company is about relationships.”

Neither Helms nor Garner are critical of Alfa’s decision to not renew so many policies. “We were trying to do the right thing, ” Garner says. “All the insurance companies had to deal with these storms.”

Alfa, Helms says, will continue its efforts to maintain and build relationships throughout its extensive grassroots network in Alabama. Begun in 1946 by selling fire insurance to farmers, Alfa now has more than a million customers. It does business in 11 states and has 240 offices in Alabama. “We are one of the few nongovernment organizations, maybe the only business, that has at least one office in all 67 counties in Alabama, ” Helms says.

“Our goal is to have that hometown agent who can meet all your insurance needs — homeowners, auto, life, business. I think you’ll see with our company, and other companies as well, more choices for the customer. We want to say ‘yes’ to them.”

Garner puts it differently: “I’m not very good at saying ‘no, ’” she says.

Charlie Ingram is a freelance writer for Business Alabama. He lives in Birmingham.

Text By Charlie Ingram

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