State Farm reveals massive savings
For the second consecutive year, State Farm has experienced growth in its auto policies while reporting lower earned premium for its auto lines.
In its recently released financial report, the nation’s number one auto insurer revealed a total of $27.6 billion in paid out auto claims and loss adjustment expenses for 2020, down almost 14% from $32 billion from the previous year.
Earned premiums, however, were nearly identical, amounting to $41.3 billion compared to 2019’s $41.5 billion. The $200 million earned premium decline came despite a rise in market share – something the insurer attributed to its “focus on returning value to customers in the form of overall lower premiums.”
State Farm said it reduced premiums by an average of 11% nationally, saving customers a total of $2.2 billion over a six-month policy period. The company also paid out $1.9 billion in dividends to its auto customers.
“We strive to help more people in more ways,” said Jon Farney, senior vice president, treasurer, and chief financial officer at State Farm. “In an unprecedented year like 2020, we focus on our core mission to help people manage the risks of everyday life, recover from the unexpected, and realize their dreams.”
At the height of the pandemic last year, State Farm rolled out the Good Neighbor Relief program as policyholders spent significantly less time driving, which resulted in reduced claims. As part of the program, the insurer paid approximately $2 billion in dividends to auto insurance policyholders and premium relief for other auto customers.
“The Good Neighbor Relief Program is a testament of our commitment to our policyholders and communities,” Farney said. “Whether premium relief, dividends to State Farm Mutual auto customers, payment flexibility, or philanthropic efforts in the communities we live and work, we're focused on relief and recovery efforts.”
But even after the dividends and premium cuts, State Farm’s auto insurance line still racked up a huge gain. Its $3.5 billion underwriting gain, minus $1.9 billion in dividends, is equivalent to $1.6 billion in net profit.