State Farm Swot Analysis
Strengths Largest personal lines insurer in the U.S. (through its property, life and health policies), State Farm covers about one in five households. has been the number one automobile insurer in the United States since 1942.
Top 50 Employer - Equal Opportunity Magazine's 2009 Reader's Choice Award (2009).
National Association of Female Executives Top Companies for Executive Women - The National Association of Female Executives (NAFE) named State Farm among their Top 30 Companies for Executive Women for the second year in a row (2008, 2009).
Most Admired Company - Fortune Magazine has recognized State Farm as one of the 2009 World's Most Admired Companies in the property & casualty'insurance industry.
Top 50 Most Military-Friendly Employer …show more content…
- G.I. Jobs Magazine award winner for the fourth consecutive year (2008-2005).
Computerworld Best Places to Work in IT - IDG's Computerworld, ranked State Farm as one of the top 100 work environments for technology professionals (2008, 2007 & 2002).
State Farm insures more cars and homes than any other insurer in the U.S., is the leading insurer of watercraft and is also a leading insurer in Canada. State Farm's 17,700 agents and 68,600 employees serve 81 million policies and accounts - more than 78.7 million auto, fire, life and health policies in the United States and Canada, and more than 1.9 million bank accounts. State Farm Mutual Automobile Insurance Company is the parent of the State Farm family of companies. State Farm is ranked No. 31 on the Fortune 500 list of largest companies.
Several insurance companies did gain significant ground from last year in the eyes of the U.S. public, including Traveler's (+7.17%) and State Farm (+7.18%) according to global pulse
Its products are marketed via some 17,000 agents in the US and Canada.
Key numbers for fiscal year ending December, 2007:
Sales: $61,600.0M
One year growth: 1.8%
State Farm Insurance is the largest automobile insurer in the United States. Insuring one in every five automobiles in the United States givers the company a strong market position. The company is almost as strong in the personal property and casualty insurance market. State Farm Companies also has a strong and stable management. Only two families have ever provided the top management at the mutual company. The current top management group, the Rusts, have been in charge of the firm since 1954.
Net income: $5,460.0M
Income growth: 2.6%
State Farm is the leading personal (automobiles, property, and casualty) insurer in the United States.
The mutual company is in a strong industry position and has positive profit potential for the coming five years.
Through a network of over 16,700 agents, the company and its subsidiaries handle 71 million auto, home, life, and health insurance policies. The State Farm group also offers its customers mutual funds and a variety of banking services, including deposit accounts, CDs, and mortgages via the Internet and telephone.
Unlike a capital stock company, which distributes dividends, a mutual company adjusts premium costs and will refund a portion of the company's surplus to policyholders during periods when claims are lower and income higher. This innovation of tying insurance rates to risk level established State Farm's legacy as a smart insurer that passed savings on to the customer. another key element in State Farm's success was its unique agent force. Normally, insurance agents represented a number of different companies, took large commissions, and shouldered a great deal of the paperworkcentral office in Bloomington handled most of the paperwork, which freed up its agents to spend the bulk of their time …show more content…
selling.
State Farm states that its success depends upon "quality service and relationships, mutual trust, integrity and financial strength." Its vision for the future is to "be the customer's first and best choice in the products and services we provide. We will continue to be the leader in the insurance industry and we will become a leader in the financial services arena. Our customers' needs ' determine our path."
Industry Analysis
'''''The industry analysis segment of this strategy analysis must consider each of the sub sectors of the financial services sector in which the subsidiaries of State Farm Companies operate. State Farm's primary industry focus is insurance. Within the insurance sub-sector of the financial services sector, State Farm companies provides property and casualty insurance, automobile insurance, homeowners insurance, life insurance, and non-medical health insurance (health care services provided by non-medical professionals). Additionally, however, State Farm provides banking services (deposit accounts, certificates of deposit, mortgages, personal loans, and business loans) on a nationwide basis through an online thrift subsidiary. Another State Farm subsidiary offers securities services, limited at present to mutual funds administered by State Farm. The company also operates its own automobile repair company, a service that provides accelerated access to repair work for State Farm automobile insurance customers.
Opportunities
The company decided to exit New Jersey's auto insurance market due in part to the state's auto insurance regulations, which drove insurance rates down. The firm's homeowner's insurance sector was also plagued with a flood of claims related to mold, especially from Texas policyholders. In September 2001, State Farm stopped accepting new business in Texas. By 2002, it had dropped new homeowner business in 17 states.
State Farm, together with RenaissanceRe, created reinsurance firm and Da Vinci based in Bermuda.
The reinsurance firm services both State Farm subsidiaries and other insurance firms.
'''''At present, the insurance sub sector is the most relevant to the operations of State Farm Insurance Companies. In the new future, however, projections indicate that banking services and securities services will assume growing relevance for State Farm Companies.
Insurers also are moving into e-marketing. This approach is increasingly attractive to consumers. Thus, the move is good for the industry. Some insurers, such as State Farm, also are using electronic networks as the technological basis for the delivery of banking and investment services. Most insurers, however, are lagging in the use of electronic networks to interact with customers.
A strong opportunity for State Farm is in the selling of insurance, banking, and securities products over the Internet. The company is ahead of most other insurance companies in this effort. Reinsurance is another opportunity for the company.
Weaknesses
Insurers generally are moving towards the use of credit checks as another tool to apply in rate setting for individual customers. This practice hit low income and moderate-income policyholders especially hard. While this approach is a sure way to increase rates, it also is a tactic that will increase resentment among consumers and cause state insurance regulating agencies to place the industry under closer scrutiny. Industries such as insurance never seem to learn from past mistakes.
The major weakness at State Farm in the contemporary period is the relationship between the company and its sales force. State Farm earns higher profits from repeat business than from new business. Since 1998, the company has been reducing new business commissions and base pay in favor of incentives for both customer retention and the cross selling of State Farm products. This action by the company created resentment among members of the company's sales force. Problems related to mold related claims against homeowners policies in California and Texas also led to State Farm pulling out of the homeowners insurance markets in those states.
Threats
In early 2009, State Farm's Florida subsidiary, the state's largest insurer, got out of the homeowner's insurance business in Florida after state regulators refused to approve a 47% increase in insurance premiums. State Farm said that, in Florida, it had paid out $1.21 in claims for every dollar in premiums since 2000. Several other home insurers have pulled out of Florida as well; many homeowners are now using the Citizens Property Insurance Corp. run by the state government.[10]
State Farm's top automobile insurance competitors, based on premium written, include Allstate, Progressive, GEICO, Zurich, Nationwide, USAA, Liberty Mutual, American International Group, and American Family Insurance Group.[13]
Negative environmental factors affected some segments of the insurance sub sector in recent years. Homeowners' insurers were hit hard by hurricane damage claims and by mold claims. Automobile insurers were hard hit by both rising accident rates and increasing repair costs. Efforts in some states to control prices increases for several forms of insurance had negative effects on the operations of insurers. The terrorist attacks in New York City and Washington had serious implications for both property insurers and life insurers.
'''''Plummeting profitability in 2001 marked the fourth consecutive year of similar performance in the insurance sub-sector of the financial services sector since the sub-sector historically high profitability level attained in 1997. Underwriting losses in 2000 and 2001 established those years as two of the three most devastating years for the insurance sub-sector. Only the profitability performance in 1992 (Hurricane Andrew) was worse for the insurance sub sector. Projections indicate profitability improvements for the sub-sector over the coming five years. Improvements, however, will be gradual, according to projections. Both rates and revenues are increasing, however, early in 2002.
State Farm Insurance has rocky relationships with several state insurance regulating agencies. The failure of the company to deal effectively with regulators led to a company decision to withdraw from the automobile insurance market in New Jersey. The company cannot afford for similar outcomes to occur in other states. The company also is beset with multiple class action lawsuits. Potentially the most damaging is the finding of a state appellate court in Illinois that the company's use of after-market parts in the repair on insured automobiles violates the insurance contracts between the company and its customers. Should this ruling stand and extend to other states, it will affect all automobile insurers; however, State Farm is the direct target of the action. State Farm settled a class-action suit in Arizona stemming fro the company's refusal to pay uninsured motorist policy claims where insured drivers held multiple policies.
Strengths
Top 50 Employer - Equal Opportunity Magazine's 2009 Reader's Choice Award (2009).
National Association of Female Executives Top Companies for Executive Women - The National Association of Female Executives (NAFE) named State Farm among their Top 30 Companies for Executive Women for the second year in a row (2008, 2009).
Most Admired Company - Fortune Magazine has recognized State Farm as one of the 2009 World's Most Admired Companies in the property & casualty'insurance industry.
Top 50 Most Military-Friendly Employer …show more content…
- G.I. Jobs Magazine award winner for the fourth consecutive year (2008-2005).
Computerworld Best Places to Work in IT - IDG's Computerworld, ranked State Farm as one of the top 100 work environments for technology professionals (2008, 2007 & 2002).
State Farm insures more cars and homes than any other insurer in the U.S., is the leading insurer of watercraft and is also a leading insurer in Canada. State Farm's 17,700 agents and 68,600 employees serve 81 million policies and accounts - more than 78.7 million auto, fire, life and health policies in the United States and Canada, and more than 1.9 million bank accounts. State Farm Mutual Automobile Insurance Company is the parent of the State Farm family of companies. State Farm is ranked No. 31 on the Fortune 500 list of largest companies.
Several insurance companies did gain significant ground from last year in the eyes of the U.S. public, including Traveler's (+7.17%) and State Farm (+7.18%) according to global pulse
Its products are marketed via some 17,000 agents in the US and Canada.
Key numbers for fiscal year ending December, 2007:
Sales: $61,600.0M
One year growth: 1.8%
State Farm Insurance is the largest automobile insurer in the United States. Insuring one in every five automobiles in the United States givers the company a strong market position. The company is almost as strong in the personal property and casualty insurance market. State Farm Companies also has a strong and stable management. Only two families have ever provided the top management at the mutual company. The current top management group, the Rusts, have been in charge of the firm since 1954.
Net income: $5,460.0M
Income growth: 2.6%
State Farm is the leading personal (automobiles, property, and casualty) insurer in the United States.
The mutual company is in a strong industry position and has positive profit potential for the coming five years.
Through a network of over 16,700 agents, the company and its subsidiaries handle 71 million auto, home, life, and health insurance policies. The State Farm group also offers its customers mutual funds and a variety of banking services, including deposit accounts, CDs, and mortgages via the Internet and telephone.
Unlike a capital stock company, which distributes dividends, a mutual company adjusts premium costs and will refund a portion of the company's surplus to policyholders during periods when claims are lower and income higher. This innovation of tying insurance rates to risk level established State Farm's legacy as a smart insurer that passed savings on to the customer. another key element in State Farm's success was its unique agent force. Normally, insurance agents represented a number of different companies, took large commissions, and shouldered a great deal of the paperworkcentral office in Bloomington handled most of the paperwork, which freed up its agents to spend the bulk of their time …show more content…
selling.
State Farm states that its success depends upon "quality service and relationships, mutual trust, integrity and financial strength." Its vision for the future is to "be the customer's first and best choice in the products and services we provide. We will continue to be the leader in the insurance industry and we will become a leader in the financial services arena. Our customers' needs ' determine our path."
Industry Analysis
'''''The industry analysis segment of this strategy analysis must consider each of the sub sectors of the financial services sector in which the subsidiaries of State Farm Companies operate. State Farm's primary industry focus is insurance. Within the insurance sub-sector of the financial services sector, State Farm companies provides property and casualty insurance, automobile insurance, homeowners insurance, life insurance, and non-medical health insurance (health care services provided by non-medical professionals). Additionally, however, State Farm provides banking services (deposit accounts, certificates of deposit, mortgages, personal loans, and business loans) on a nationwide basis through an online thrift subsidiary. Another State Farm subsidiary offers securities services, limited at present to mutual funds administered by State Farm. The company also operates its own automobile repair company, a service that provides accelerated access to repair work for State Farm automobile insurance customers.
Opportunities
The company decided to exit New Jersey's auto insurance market due in part to the state's auto insurance regulations, which drove insurance rates down. The firm's homeowner's insurance sector was also plagued with a flood of claims related to mold, especially from Texas policyholders. In September 2001, State Farm stopped accepting new business in Texas. By 2002, it had dropped new homeowner business in 17 states.
State Farm, together with RenaissanceRe, created reinsurance firm and Da Vinci based in Bermuda.
The reinsurance firm services both State Farm subsidiaries and other insurance firms.
'''''At present, the insurance sub sector is the most relevant to the operations of State Farm Insurance Companies. In the new future, however, projections indicate that banking services and securities services will assume growing relevance for State Farm Companies.
Insurers also are moving into e-marketing. This approach is increasingly attractive to consumers. Thus, the move is good for the industry. Some insurers, such as State Farm, also are using electronic networks as the technological basis for the delivery of banking and investment services. Most insurers, however, are lagging in the use of electronic networks to interact with customers.
A strong opportunity for State Farm is in the selling of insurance, banking, and securities products over the Internet. The company is ahead of most other insurance companies in this effort. Reinsurance is another opportunity for the company.
Weaknesses
Insurers generally are moving towards the use of credit checks as another tool to apply in rate setting for individual customers. This practice hit low income and moderate-income policyholders especially hard. While this approach is a sure way to increase rates, it also is a tactic that will increase resentment among consumers and cause state insurance regulating agencies to place the industry under closer scrutiny. Industries such as insurance never seem to learn from past mistakes.
The major weakness at State Farm in the contemporary period is the relationship between the company and its sales force. State Farm earns higher profits from repeat business than from new business. Since 1998, the company has been reducing new business commissions and base pay in favor of incentives for both customer retention and the cross selling of State Farm products. This action by the company created resentment among members of the company's sales force. Problems related to mold related claims against homeowners policies in California and Texas also led to State Farm pulling out of the homeowners insurance markets in those states.
Threats
In early 2009, State Farm's Florida subsidiary, the state's largest insurer, got out of the homeowner's insurance business in Florida after state regulators refused to approve a 47% increase in insurance premiums. State Farm said that, in Florida, it had paid out $1.21 in claims for every dollar in premiums since 2000. Several other home insurers have pulled out of Florida as well; many homeowners are now using the Citizens Property Insurance Corp. run by the state government.[10]
State Farm's top automobile insurance competitors, based on premium written, include Allstate, Progressive, GEICO, Zurich, Nationwide, USAA, Liberty Mutual, American International Group, and American Family Insurance Group.[13]
Negative environmental factors affected some segments of the insurance sub sector in recent years. Homeowners' insurers were hit hard by hurricane damage claims and by mold claims. Automobile insurers were hard hit by both rising accident rates and increasing repair costs. Efforts in some states to control prices increases for several forms of insurance had negative effects on the operations of insurers. The terrorist attacks in New York City and Washington had serious implications for both property insurers and life insurers.
'''''Plummeting profitability in 2001 marked the fourth consecutive year of similar performance in the insurance sub-sector of the financial services sector since the sub-sector historically high profitability level attained in 1997. Underwriting losses in 2000 and 2001 established those years as two of the three most devastating years for the insurance sub-sector. Only the profitability performance in 1992 (Hurricane Andrew) was worse for the insurance sub sector. Projections indicate profitability improvements for the sub-sector over the coming five years. Improvements, however, will be gradual, according to projections. Both rates and revenues are increasing, however, early in 2002.
State Farm Insurance has rocky relationships with several state insurance regulating agencies. The failure of the company to deal effectively with regulators led to a company decision to withdraw from the automobile insurance market in New Jersey. The company cannot afford for similar outcomes to occur in other states. The company also is beset with multiple class action lawsuits. Potentially the most damaging is the finding of a state appellate court in Illinois that the company's use of after-market parts in the repair on insured automobiles violates the insurance contracts between the company and its customers. Should this ruling stand and extend to other states, it will affect all automobile insurers; however, State Farm is the direct target of the action. State Farm settled a class-action suit in Arizona stemming fro the company's refusal to pay uninsured motorist policy claims where insured drivers held multiple policies.
Strengths