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Home / Insurance / Triple-I Blog | JIF 2022: State Farm CEO talks about the power and promise of reciprocity

Triple-I Blog | JIF 2022: State Farm CEO talks about the power and promise of reciprocity



State Farm CEO Michael Tipsord discussed a wide range of insurance industry issues and trends with Triple-I CEO Sean Kevelighan at Triple-I’s 2022 Joint Industry Forum. A unifying thread throughout their conversation was the continued relevance of State Farm̵

7;s mutual ownership structure and “captive” agent network in today’s risk and operational environment.

State Farm is unusual among major U.S. insurers in that it has retained its mutual structure and continues to rely primarily on a network of more than 19,000 captive agents to sell its products. Founded in 1922 by a farmer who believed that farmers should not have to pay the same auto insurance rates as city dwellers, State Farm has grown to become the largest home and auto insurance company in the United States, in terms of market share and written premiums.

The mutual structure—where the policyholders own the insurer—was popular at the time, but in recent decades many mutuals have transitioned to shareholder-owned corporations to gain access to the capital needed to grow faster.

“This mutual structure permeates everything we do, every decision we make,” Tipsord said. “My focus is always on what is in the best long-term interest of the State Farm customer base as a whole.”

Reciprocity “gives us the flexibility to make choices that our listed counterparts might not think they have,” he explained. “The mutual structure must be combined with financial strength. Annual operating profit is only a means to this end. We are not under the same pressure” as insurers who have to answer to external shareholders.

Similarly, State Farm’s workforce of captive agents—located in all but two states in the United States—“are in their communities, day in and day out. They are in a position to understand their customers because they live with their customers.”

Tipsord noted that 95 percent of State Farm’s business comes through its agents, and “we’re investing back” in that workforce.

When the pandemic hit and the lockdowns began, Tipsord said, “Our agents and team members were proactively reaching out to their customers — not to sell anything, just to check in, to see if they were OK. To see if they needed help. There are hundreds of stories of agents identifying seniors who needed help buying food. It always comes back to our mission to help people.”

But the success of State Farm’s mutual model and captive agency strength doesn’t absolve the company of the need to evolve with changing conditions. State Farm is investing heavily in “digitally enabling our agents,” Tipsord said, “and our agents and their teams adapt easily” to their customers’ expectations.

Part of that digitization push was State Farm’s recent $1.2 billion investment in ADT for a 15 percent stake in the home security company.

“What was most important in that transaction was the relationship it created between State Farm, ADT and Google,” Tipsord said. “This is what I call the $300 million opportunity fund. Let’s dedicate resources so that we can look for ways that you bring together these three organizations that have very different competencies to help our customers.”


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