Auto insurance

State Farm suffers big auto insurance loss, posts record policy growth in 2021

Additionally, the mutual insurer paid out $1.9 billion in dividends to its auto insurance customers in 2020 and another $401 million last year.

Big investment gains, fueled by a burning stock market, kept State Farm in the black. It posted net income of $1.3 billion compared to $3.7 billion in 2020.

State Farm policies grew by about 2 million to more than 87 million in 2021. The company doesn’t provide data for individual insurance types, so those include auto, home and life insurance.

But state-by-state figures showed State Farm’s aggressive rate cut in 2020, as the pandemic provided a revenue windfall for auto insurers, resulted in significant policy growth.

The extent to which the pandemic has upended the auto insurance industry is illustrated by the fact that State Farm’s 2021 policy growth has overtaken Geico, the second-largest auto insurer in the United States and for decades a leader. the growth of the sector.

For the first time in at least 20 years, Geico saw an insignificant increase in auto policies in 2021. Policies were “slightly higher” than in 2020, according to the annual report released over the weekend by Geico’s parent company. Geico, Berkshire Hathaway.

The irony is that Geico has earned so much over the years by offering lower rates than insurers sold by agents like State Farm and Northbrook-based Allstate, which until the 2000s dominated the business. Now State Farm is the rate cutter, and Geico is aggressively raising prices to meet higher inflation-related costs for used cars and auto parts.

As a result, State Farm’s auto premiums in 2021 actually fell despite the higher number of policies, while Geico’s rose slightly after taking into account refunds in 2020 related to the pandemic.

State Farm’s auto insurance loss last year wasn’t the worst. In 2016, the company lost a record $7 billion insuring vehicles after collisions rose much faster than the industry expected.

As a mutual insurer, technically owned by its policyholders, State Farm is not subject to investor pressure to maintain profitability and can afford to absorb even multi-billion dollar losses in order to gain market share. .