State Farm : Everything you need to know

State Farm: Everything you need to know

Headquarters: One State Farm Plaza, Bloomington, Illinois 61710
Direct premiums written: $70.3 billion (2021, including US territories)
Direct premiums earned: $67.9 billion (2021, including US territories)
Total assets: $214.4 billion
Size (workforce): 58,000 employees, including 19,200 agents
Underwriting expertise: Auto, home, business, life, and health insurance
Key people: Michael L. Tipsord (chairman, president, and CEO), Randall H. Harbert (executive vice-president and chief agency, sales and marketing officer), Mary Schmidt (executive vice-president and chief administrative officer), Paul Smith (executive vice-president and chief operating officer), Fawad Ahmad (senior vice-president and chief digital officer), Kristyn Cook (senior vice-president - agency & marketing), Jon Farney (senior vice-president, treasurer and chief financial officer), Steve McManus (senior vice-president and general counsel), Joe Monk (senior vice-president – financial services), Chris Schell (senior vice-president – property and casualty), Cathy Wallace (senior vice-president and chief risk officer), Robert Yi (senior vice-president – P&C claims)

 

Pros

  • Its customer satisfaction and financial strength ratings are above average.
  • The insurer’s agents are easily accessible nationwide.
  • It has a diverse range of customizable coverage options.
  • Its auto insurance rates are lower than the industry average.
  • Customers can access services, including quotes, bills payment, and filing of claims through its user-friendly mobile app and website.

 

Cons

  • Homeowners insurance premiums can be above the industry average.
  • It does not always offer specialized protection for auto insurance clients with unique coverage needs.
  • Customers can only access products and services directly from the company or through a network of agents.

 

Common coverage types

Auto insurance

Coverage type

What it pays for

Collision coverage

Repair or replacement cost if the vehicle collides with another vehicle or object.

Comprehensive coverage

Repair or replacement cost if the vehicle is damaged by something besides a collision, including theft, fire, vandalism, or hitting an animal

Liability coverage

Another person’s medical expenses, vehicle repairs, and property damage if the policyholder is at fault

Car rental and travel expenses coverage

Cost of renting a replacement vehicle while the owner’s vehicle under repair and expenses incurred from meals, lodging, and transportation if the accident happens more than 50 miles from home

Uninsured motor vehicle coverage

Medical expenses if the policyholder is injured in an accident caused by someone who does not have liability insurance

Underinsured motor vehicle coverage

Medical expenses if the policyholder is injured in an accident caused by someone who is underinsured or does not have enough liability insurance

Medical coverage payments

Medical and funeral expenses if the insured person is injured or killed in an accident

Emergency road service coverage

Expenses for emergency road services

Rideshare driver coverage

For drivers employed in rideshare companies such as Uber or Lyft

 

State Farm’s auto insurance discounts

  • Drive Safe & Save™ – By signing up for this mobile app, drivers can save up to 30% depending on how safely they drive
  • Steer Clear® – New drivers or those under 25-years old without at-fault accidents or moving violations in the past three years can save up to 20% in car insurance
  • Accident-free discount – For insured vehicles without a chargeable accident for at least three straight years
  • Defensive driving course discount – 10% to 15% discount for drivers who take driver safety courses
  • Good student discount – Up to 25% discounts for students aged 16 to 25 with a B or 3.0 GPA or ranked in the top 20% of their class
  • Good driving discount – For drivers who have gone at least three straight years without moving violations or at-fault accidents
  • Driver training discount – For drivers under the 21-years old who complete an approved driver education course
  • Student away at school discount – For students under 25-years old who have moved away to school and only uses the car while at home during school vacations and holidays
  • Vehicle safety discount – Up to 40% discount on medical payments coverage for drivers of vehicles made in 1994 or later
  • Passive restraint discount – Up to 40% discount on medical payments for vehicles made on or before 1993 with a factory-installed airbag or other passive restraint systems
  • Anti-theft discount – For vehicles installed with an anti-theft device
  • Multi-vehicle discount – Up to 20% discount for households with two or more vehicles insured
  • Multi-policy discount – Up to 17% discount for clients who also have homeowners, renters, condo, or life insurance
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2021 J.D. Power customer satisfaction rating

872 out of 1,000 points (tied for first among large auto insurers in the US)

Cost to insure most popular cars

Average annual cost in 2022, according to The Zebra:

#1. Ford F-150: $1,286

#2. Chevrolet Silverado: $1,382

#3. Dodge Grand Caravan: $1,449

#4. Toyota RAV4: $1,400

#5. Honda CR-V: $1,269

#6. Nissan Frontier: $1,243

#7. Kia Sedona: $1,490

#8. Subaru Forester: $1,338

#9. GMC Sierra $1,477

#10. Chevrolet Equinox $1,403

 

Car insurance rates by age

2021 average rates according to US News:

25-year-old female: $1,262

25-year-old male: $1,396

35-year-old female: $1,139

35-year-old male: $1,139

60-year-old female: $1,038

60-year-old male: $1,038

 

Car insurance rates by driving record

2021 average rates according to US News:

$1,169 for clients with a clean driving record

$1,299 for drivers with one speeding violation

$1,405 for those with one accident, and

$1,568 for those with one DUI

Home and property insurance

Homeowners insurance

Typical inclusions

What it covers

Home

The physical dwelling structure and other structures attached to it

Other structures

Structures separate from the main dwelling, including a detached garage, pool house, guesthouse, greenhouse, and tool shed

Personal property

Contents of the home, including furniture, appliances, and clothing

Loss of use or additional living expenses

Costs of hotel bills, apartment or rental home, eating out, and other living expenses while the home is being repaired

Personal liability

Legal liability for bodily injury or property damage if a third party is accidentally injured

Medical payments

If a third party is accidentally injured in the property and needs medical treatment

Policy exclusions

Ordinance or law

Losses due to law or ordinance of the community where home is located

Earth movement

Losses caused by events such as earthquakes, volcanic eruptions, or landslides

Water damage

Damage from water that backs up from sewers or drains, or water seeping through walls

Flood damage

Damage from rising water, mudslide, or wave action

Mold damage

Losses caused by molds

Other exclusions

Damage caused by war, nuclear hazard, neglect, and intentional loss

 

State Farm’s home insurance discounts

Multiple line discount – For those purchasing various insurance policies

Home security insurance discount -  For homes installed with fire, smoke, or burglar alarms or any other monitoring system

Roofing discount - If the roof is deemed a total loss due to a covered claim, homeowners’ policy includes loss settlement for the roof on a replacement cost basis

 

2021 J.D. Power customer satisfaction rating

835 out of 1,000 points (tied for third among home insurers in the US)

Condo insurance

Typical inclusions

What it covers

Personal property

Personal belongings, including clothes, furniture, electronic equipment, and other household items for their replacement or actual cash value

Loss of use

Portion of hotel bills, meals, laundry, and other living expenses that exceed what the unit owner would pay for if there were living in the condo

Personal liability

Legal liability for physical injury or property damage for which the unit owner is responsible

 

State Farm’s home insurance discounts

Multiple line discount – For those who purchase condo unit owners’ and auto insurance

Home security insurance discount – For units installed with fire, smoke, or burglar alarms or any other monitoring system

Automatic sprinklers discounts – For units with an automatic sprinkler system installed

Renters insurance

Typical inclusions

What it covers

Accidents

Damage caused by vehicular collision, falling objects, fire, smoke, water from plumbing, and appliances

Weather impacts

Damage caused by the weight of snow, sleet, or ice, lightning, windstorms, hail, and water damage due to the freezing of plumbing systems

Malicious mischief

Damage caused by vandalism, theft, riots or civil commotion, and aircraft and vehicle damage

Loss of use

Living expenses for the shortest time needed to repair the property, or for the people in the household to settle in another home for up to 24 months

State Farm’s renters’ insurance discounts

Multiline discounts – For those combining their renters’ and auto insurance policies

Home alert protection discounts – For homes installed with fire, smoke, or burglar alarms or any other monitoring system

 

2021 J.D. Power customer satisfaction rating

866 out of 1,000 points (second among renters’ insurance providers in the US)

Life insurance

Coverage type

Features

Permanent life

  • Provides lifetime coverage
  • Cash value accumulates over time
  • Level premiums
  • Some types offer flexible premium payments and level or increasing death benefit options

Term life

  • Provides coverage for a limited period
  • Provides a death benefit, but typically no cash value
  • May be renewable or convertible

 

2021 J.D. Power customer satisfaction rating

822 out of 1,000 points (first among life insurance providers in the US)

 

Small business insurance

Coverage type

What it covers

Commercial auto insurance

Cars, trucks, vans, and other vehicles used for the business

Commercial liability umbrella policies (CLUP)

Worst-case scenarios that exceed the liability limits of an existing policy

Business owners’ policies (BOP)

Combines property and liability coverage into one package

Workers’ compensation

Work-related injuries or illness

Builders risk insurance

Commercial buildings under construction

 

About

General background

Founded in 1922, 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.

Apart from offering P&C insurance, State Farm subsidiaries and affiliates provide life and health insurance, annuities, mutual funds and banking products. In 2020, 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.”  

 

Product menu

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, 2020, the firm claimed to service around 84 million policies and accounts.

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.”

 

State Farm at a glance – 2021

State Farm is the largest auto insurance provider in the US, accounting for 16% of the overall market share.

More than 15% of the money spent on private passenger auto premiums in the country goes to the insurer.

It is also the largest home insurance provider in the nation, taking up 18% of the total market share.

State Farm has serviced more than 85 million policies and accounts across the US, with the help of its 58,000-strong workforce, including more than 19,000 independent agents.

The firm has an A++ rating for financial strength from AM Best, the highest rating possible.

State Farm : In the news