State Farm: Everything you need to know
Consolidated net income in 2018: $6.35 billion
Consolidated net premium earned in 2018: $44.4 billion
Number of employees: c. 58,000
Number of agents: c.19,000
Ranking in the 2018 Fortune 500 list of companies: No. 36
State Farm is a large group of insurance and financial services firms based in the US. The group’s parent company is State Farm Mutual Automobile Insurance Company, which is a mutual insurance company based in Bloomington, Illinois. State Farm is best known for offering property and casualty (P&C) insurance products, especially in personal lines. According to SNL Financial Data, State Farm insures more cars and homes than any other insurer in the US.
As well as offering P&C insurance, State Farm subsidiaries and affiliates also offer life and health insurance, annuities, mutual funds and banking products. In 2018, the firm was ranked 36th on the Fortune 500 list of largest companies. It has approximately 58,000 employees and sells its products through a 19,000-strong force of independent contractor exclusive State Farm agents.
Becoming a ‘good neighbor’
Consumers may know State Farm by its ‘good neighbor’ slogan. That premise started almost 100-years-ago when retired farmer and insurance salesman George Jacob “G.J.” Mecherle founded a single-line auto insurance company in 1922, aimed specifically at the farming community. The firm later expanded its client reach and started offering other product lines, such as homeowners’ and life insurance, followed by banking and other financial services. The ‘good neighbor’ catchphrase has been around since 1971, when American songwriter Barry Manilow wrote a jingle for the insurance giant, which included the phrase: “Like a good neighbor, State Farm is there.”
Today, State Farm offers about 100 products and services, in five different lines of business: property and casualty, life and health, annuities, mutual funds, and banking products. As of December 31, 2017, the firm claimed to service around 83.4 million policies and accounts, of which:
- 44.1 million were in auto insurance
- Over 28 million were in fire insurance
- Eight million were in life
- Nearly 867,000 were in health
Away from insurance, State Farm claims to be the 101st largest bank in the US in terms of assets (holding nearly $16.7 billion), and has nearly 519,000 accounts in mutual funds. State Farm allegedly handles around 39,000 claims per day.
Past and present leaders
State Farm has had six chief executive officers in 97 years. The company founder, George J. Mecherle led the firm for 14 years from 1922 to 1937. He was succeeded by:
- Raymond Mecherle: 1937 – 1954 (16 years)
- Adlai Rust: 1954 – 1970 (15 years)
- Edward B. Rust, Sr.: 1970 – 1985 (14 years)
- Edward B. Rust, Jr.: 1985 – 2015 (29 years)
- Michael Tipsord: 2015 – present.
A champion of auto safety
For many years, State Farm has been publicly championing road safety. The company has been heavily involved and influential in the passing of multiple seatbelt laws in the US and it continues to advocate for seatbelt and teen driver safety. It’s also a prominent player in the fight against distracted driving (a problem of almost epidemic proportions in the US), offering policy incentives around driving best practices.
Mitigation driving down costs
State Farm’s strategies and messaging around safe driving seem to be making an impact. In 2019, the insurer announced personal auto insurance rate reductions in multiple states including: Arizona, Louisiana and South Carolina. This is a newsworthy achievement for the insurer as the wider auto insurance industry in the US grapples with multiple challenges around increased loss frequency and severity, largely driven by distracted driving.
While premiums for individual motorists continue to vary based on policy terms, chosen coverages and their unique risk profiles, millions of State Farm auto insurance policyholders have seen rate reductions in 2019. Becky Blevins, State Farm vice president – agency, commented: “We’re always evaluating how we can best serve our customers and are very pleased to be able to offer [these rate decreases]. Improving expenses and losses were important factors, among many, that supported our decision to make this rate change.”
Taking the fight to insurtech
Like all large insurance corporations, State Farm has invested in innovation and technology so that it can compete in the modern digital marketplace. The firm believes in empowering its agents with technology, but it rejects the widespread narrative that technology will in some way disrupt incumbent insurers and the traditional agent/broker distribution channel.
In 2018, State Farm launched a commercial, in which it mocked AI-powered insurtechs such as Lemonade. The ad depicted Houston Rockets players James Harden and Chris Paul as well as a State Farm agent (played by Oscar Nunez of “The Office”) all mocking a robot insurance agent as it attempted to emulate human emotion. Nunez’ character said in the commercial: “The budget insurance companies are building these cheap, knockoff robots to compete with us… These bots don’t have the compassion of a real State Farm agent.”
Despite its lighthearted tone, State Farm did receive some stick following the release of the commercial. Author and futurist Chunka Mui wrote in a feature for Forbes magazine that there’s more to insurtech than just talking robots and that: “State Farm executives need to get beyond the mocking and think deeply about how emerging innovations might disrupt their strategic assumptions.”