UPDATE: Allstate Warns Agents Of Errors In Tax Forms, Reports
February 10 2012 - 8:37PM
Dow Jones News
Allstate Corp. (ALL) warned its insurance agents Friday it had
discovered separate errors in their tax documents and the year-end
reports that show data used to calculate their annual bonuses.
The mistakes come a month after the company made a separate
miscalculation that underreported January commissions. The latest
errors set off a new uproar among Allstate's sales force, where
some agents were already up in arms about plans to cut their base
pay.
The error in the tax documents--the "Form 1099" that shows each
agent's 2011 income--in some cases provided incorrect information
about how much agents had been paid, and in other cases listed pay
data belonging to another agent. A spokeswoman said about 4,700 of
their agency-owners were affected, out of about 11,000.
The company told agents they may have to file an amended tax
return if they had already paid their taxes, and promised to
reimburse them for the cost of resubmitting their returns.
The second mistake, which the company said was unrelated, was in
a December performance report that shows figures that will be used
to calculate annual bonuses. The errors included misstated policy
counts and premiums, according to a notice posted on the computer
system used by agents.
The Allstate spokeswoman, Meghann Dowd, said the company
wouldn't know whether the mistakes had under- or over-estimated
those figures until it re-ran the reports.
Allstate hadn't yet told agents what their bonuses would be. The
company has pulled the report from the computer system that agents
use, and told the agents it will tell them what their bonuses will
be on Feb. 14.
Dowd said the company anticipates paying the bonus, which has
historically been distributed around Feb. 14, on Feb. 23. Under the
agents' contracts, the bonuses must be paid by March 15, Dowd
said.
The January error involved a report that alerts agents to their
monthly commissions. Before Allstate acknowledged its error, agents
complained their monthly pay had fallen by 20% or more in some
cases, adding that they were worried about paying January
expenses.
The report was amended, and the monthly commissions were paid on
time.
Allstate agents are classified as independent contractors, not
employees, and must cover their own costs, including the salaries
of their staff.
Even before the mistakes, many of the company's agents were
already on edge about upcoming changes in the way their commissions
are calculated. The company partially backed down from its proposed
changes in December amid the outcry, but it still plans to cut base
commissions for agents by 10% in 2013, while increasing the amount
that agents can earn in bonuses.
Agents again took to independent and in-house Internet message
boards on Friday to complain about the latest errors. One agent on
the in-house board called the mistakes "despicable," adding, "we
need to do something to get this fixed. We need to demand an
outside audit, we need some upper [management] heads to roll on
this."
Jim Fish, the executive director of the National Association of
Professional Allstate Agents, said agents are "very untrusting of
the company at this moment in time. It seems like blunder after
blunder."
Fish's group is unaffiliated with Allstate and is often critical
of the company.
In the notice posted on its agent computer system Friday, the
company said Allstate's "leaders understand and apologize for the
anxiety, concern and inconvenience that both of these issues may
cause some agency owners." It told agents the issues "are receiving
leadership's undivided attention until they are resolved."
Dowd said the issues were found "as part of our regular due
diligence" and wouldn't affect the company's fourth-quarter or
first-quarter results.
-By Erik Holm, Dow Jones Newswires; 212-416-2892;
erik.holm@dowjones.com
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