State Farm Insurance
State Farm Insurance, founded in 1922 by George Jacob Mecherle, is a leading provider of auto and home insurance in the United States and parts of Canada. Originally established to offer affordable car insurance to farmers, the company has expanded its offerings to include over one hundred products, such as life and health insurance, as well as various financial services like loans and credit cards. State Farm operates with a workforce of 58,000 employees and 19,000 independent agents, emphasizing a culture of personalized customer service.
As of 2023, State Farm held 91 million policies across various services, although it has recently faced competition from other insurers like Progressive and Geico. The company has a long-standing commitment to community involvement, supporting safety education and leadership training initiatives. However, it has encountered challenges, including legal issues related to discriminatory practices and responses to major weather events like Hurricanes Katrina and Rita, which significantly impacted its operations and reputation.
Despite these challenges, State Farm has worked towards increasing diversity within its workforce and remains a significant player in the insurance industry, adapting to changing market conditions and customer needs.
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State Farm Insurance
Company Information
- Date Founded: 1922
- Industry: Insurance
- Corporate Headquarters: Bloomington, Illinois
- Type: Private
The Fortune 500 company known as State Farm was established in 1922 by George Jacob Mecherle. He was a farmer and insurance salesperson who believed that car insurance should be more affordable for American farmers, who tended to have low accident rates. From that simple goal, State Farm has grown into the largest auto and home insurance company in the United States and parts of Canada. While the State Farm umbrella includes more than one hundred products and services, the company is best known as an insurer of vehicles, lives, homes, and property. Rather than being owned by a large group of shareholders, State Farm is owned by its various subsidiaries and policyholders.
In 2024, with 67,000 employees and 19,400 independent contractor agents who specialize in providing personal service to their clients, State Farm operates under what it labels the Re3markable® culture: "Every Customer/Every Interaction/Every Day." State Farm also prides itself on becoming heavily involved in community life, sponsoring community projects, safety education, and leadership training.
In 2023, State Farm held 91 million policies and accounts in the US. State Farm also held approximately 28 million fire insurance policies, 8 million life policies, and 867,000 health insurance policies. Health coverage includes Medicare supplementary insurance as well as income loss protection. State Farm’s financial services, offered through a partnership with US Bank, include checking, savings, fixed rate certificates of deposit, credit cards, vehicle loans, and home mortgages.
History
After setting out in 1922 to insure farming vehicles in Bloomington, Illinois, Mecherle expanded his operations by establishing a second branch in Berkeley, California. In 1929, Mecherle established the State Farm Life Insurance Company. By 1935, State Farm was insuring homes and boats as well as automobiles and lives. Over the course of the next seven years, State Farm became the largest insurer of automobiles, insuring one in every five vehicles driving on American roads. In the twenty-first century, State Farm offers life insurance and annuity products throughout the United States. Because of laws in different states, State Farm established the State Farm Life and Accident Assurance Company in 1961 to sell insurance in New York, Connecticut, and Wisconsin. The following year, State Farm General Insurance Company was founded in California in compliance with state laws on property liability. While State Farm Florida has continued to sell insurance, it does not offer any liability coverage for home and property. Since 1991, State Farm has operated in New Jersey as the State Farm Indemnity Company.
Various members of the Rust family have been involved in State Farm’s success. Adlai Rust headed the company between 1954 and 1958 and was succeeded by his son Edward, who served until 1985. At that time, Edward B. Rust Jr. became the chair and chief executive officer (CEO) of State Farm. Rust Jr. had a special interest in education, serving as co-chair of the Business Coalition for Excellence in Education and chairing the Business Education Forum. Rust was also a member of President George W. Bush’s Education Advisory Commission. Under his leadership, State Farm joined with the National Service-Learning Partnership to provide funds to K–12 school districts to add service-learning elements to their curricula. As a result of his contributions, Rust was a recipient of the National Promise of America Award in 2004. He retired as CEO of State Farm in 2015 after heading the company for thirty years and was succeeded by Michael L. Tipsord.
In 2014, State Farm's operations in Canada were sold to the Desjardins Group. It continued operating under the State Farm name until 2018 when it was rebranded as Desjardins Insurance.
Impact
State Farm has a long history of customer loyalty, and its policyholders generally express great confidence in the company. State Farm has helped to set the standard for automobile insurance and has a proven record of working toward progress, safety, and stability in American daily life. State Farm’s impact has also been felt in other ways. Since the 1960s, the company has made a conscious effort to become more racially diverse. Significant efforts were made under the leadership of Vincent J. Trosino Sr., the president of State Farm from 1991 until 2006. Diversity efforts concentrated on educating employees and the public on issues of diversity and on encouraging mentoring and personal development within the company.
Despite its stance on racial diversity, State Farm was accused of sex discrimination by 814 women in California who filed suit in 1992 under federal civil rights laws. The women insisted that they were denied opportunities to advance from clerical jobs, supplying evidence that 99.6 percent of all State Farm agents were male. The suit was eventually settled for $157 million, and State Farm was ordered to ensure that 50 percent of agents be female within ten years.
Not all policyholders have been satisfied with their coverage. In the 1990s, the fine print of State Farm automobile policies stipulated that repairs to vehicles involved in accidents be made with generic parts rather than more expensive parts sold by vehicle manufacturers. A class action lawsuit was filed against State Farm, with evidence proving that generic parts were inferior to manufacturers’ parts. Following a $1.2 billion verdict by a San Francisco jury, State Farm appealed but was eventually forced to revise its policy and pay for all cars repaired with generic parts to be redone with the correct parts.
On August 24, 1992, Hurricane Andrew hit Florida, Louisiana, and Texas, resulting in sixty-six fatalities. Damages were estimated at between $25 billion and $26.5 billion. Insurance companies, including State Farm, were inundated with claims. A more impactful weather event occurred when Hurricane Katrina devastated the Gulf Coast, notably the city of New Orleans, in August 2005. Katrina’s destructiveness was heightened by the breaching of levees, which led to major flooding. Some 1,833 people died, and damages were reported at $108 billion. In 2002, State Farm announced that it would no longer write new homeowner policies in seventeen states. Liability coverage is no longer offered in Florida and Mississippi, and State Farm has placed caps on the number of policies that can be written in other vulnerable areas. Katrina was almost immediately followed by Hurricane Rita in September 2005.
Hurricanes Katrina and Rita also led State Farm into a major lawsuit in 2005 when the company was required to notify automobile owners that it had neglected to obtain salvage titles to automobiles declared totaled by the storms. As a result, vehicles were being resold to new owners who had no idea that their vehicles had been flooded. When an insurance company totals a car, it is required to abide by state laws governing the process. Totaling generally occurs when damage to a vehicle is estimated to be greater than the market value assigned to the vehicle. Some 571,000 vehicles were damaged in this way by Katrina and Rita and their aftermath. In response to a lawsuit filed by vehicle owners, State Farm agreed to settlements in forty-nine states and Washington, DC; accepted responsibility for identifying all vehicles with improperly labeled titles; provided financial compensation; and paid repair costs and legal fees. Indiana required State Farm to purchase all affected vehicles and compensate owners for related costs. Owners who opted to retain their vehicles received a flat payment of $2,500.
In 2012, State Farm started the Neighborhood Assist program that annually awards forty nonprofit organizations $25,000 grants to help fund education and community development projects.
Into the mid-2020s, State Farm remained the leading company amongst national insurers, although Progressive and GEICO had gained ground. This followed what had been a series of profitable years for State Farm, although the company experienced a slight downturn in the early 2020s. This was primarily brought on by the COVID-19 pandemic, which resulted in a reduction of driving by insured motorists.
Like other employers, into the mid-2020s, State Farm was still in a state of transition following the COVID-19 pandemic. In 2020, the company enacted a policy that released its employees from working on-site. Several years later, after many employees had become accustomed to remote and virtual work, State Farm was encountering challenges in adapting to a resulting cultural change. This is where many members now prefer to work at home. 2022 was also a difficult year for the company in terms of revenue. State Farm had, in many cases, reduced policy rates during the pandemic to allow for an increase in unemployment. It did not adequately forecast the results of higher inflation rates that followed. This led to its CEO, Michael Tipsord, to remark that 2022 had led to the largest underwriting loss in the company's 100-year history. Still, into the mid-2020s, State Farm remained the largest auto insurance company in the US according to the National Association of Insurance Commissioners (NAIC). State Farm held approximately 18.3 percent of the market share, with direct premiums written totaling around $58.0 billion.
Bibliography
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Ball, Jeremy A. "Flood Damaged and Salvaged Automobiles Threaten Consumer Woes: Hurricane Katrina and Rita and the $40 Million State Farm Insurance Settlement." Army Lawyer, vol. 390, 2005, pp. 40–45.
Lankford, Kimberly. "Can You Believe Car Insurance Ads?" Kiplinger’s Personal Finance, vol. 70, no. 2, 2016.
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“State Farm® Announces 2023 Financial Results.” State Farm, 29 Feb. 2024, newsroom.statefarm.com/2023-financial-results/. Accessed 5 Feb. 2025.
Stock, Eric. "Analyst: A Volatile Year May Delay State Farm Losing Title of Nation's Top Auto Insurer." WGLT, 4 Jan. 2023, www.wglt.org/local-news/2023-01-04/analyst-says-a-volatile-year-for-insurance-may-delay-state-farms-fall-as-the-nations-top-auto-insurer. Accessed 5 Feb. 2025.