State Farm Insurance

By: Daniel Corral
Cynthia Sotelo
Josh Duran
Tuan Han
Raul Velarde













History of State Farm

State Farm is known as being one of the largest providers of insurance in North America
ranking in the top 50 on the Fortune 500 companies list, but before they became the leading
insurance company in the United States, and one of the leaders in Canada, State Farm and its
founder came from humble beginnings. The company began with its founder, George Jacob
“G.J.” Mecherle, who was a farmer and an insurance salesman from Bloomington, Illinois.
When he began his own his own insurance company in 1922, it was originally a single line auto
insurance company for insuring vehicles for farmers. Mecherle had a vision of operating fairly
and doing right by his customers, thus later creating the advertising jingle, “Like a good
neighbor, State Farm is there”, and gaining the reputation of doing exactly that. As the years
passed, Mecherle expanded his company from being simply an automotive insurance company
to providing life, banking, and financial services, as well as creating sub-companies for each.
Throughout the last decade State Farm has developed into being one of the top
companies in the nation, starting as purely and insurance company to insure the automotives
for farmers into the company it has become today. Today, state farm not only insures vehicle,
but as well as banking, financial, life, and properties as well. Along with the expansion of what it
now cover, State Farm has developed a good amount of sub-companies under the umbrella of
the main branch of State Farm to help with all of their policies. The main sub-companies
developed begin with the creation of their Life Insurance Company, which was licensed to sell
Life Insurance in all but 3 states (New York, Wisconsin, & Massachusetts). Following up that
division, the Fire and Casualty Company was created to provide insurance on the properties for
home owners, boat owners, and for commercial lines. Awhile after that, the State Farm Bank
was developed, and became a non-traditional financial institution. The bulk of direct customer
interaction and product assistance provide by state farm agents, augmented by a telephone call
center, mail, and the internet. There are a few other sub-companies that are not too important
because they focus mainly on working in specific states under their specific rules and
guidelines.
The growth of state Farm has been rather remarkable seeing as how it began, and how
fast it achieved becoming the largest and most recognized insurance company in the United
States. The company was founded in 1922 and by 1942 it became the number one auto
insurance company and has held that title since, and to this day every 1 in 5 cars on the road is
insured by State Farm. As of 2008, State Farm has over 67,000 employees and 17,000 agents
working for the entire company nationwide. In 2009, they were servicing over 77 million
policies in the United States and Canada and more than 40 million of those were purely for
automotives, and more than 2 million of those were bank accounts. As of 2013, State Farm
ranked 44
th
in the Fortune 500 list, showing how much the company has grown and paired with
the fact that it has been the top insurance company since 1944 also shows how fast that the
company actually grew.

State Farm’s Vision, Mission & Goals
State Farm has built upon their success by following the vision that George Mecherle
has built his company upon. Even to this day State Farm holds true to their roots and follow his
vision and turned it into the company’s vision. State Farm’s vision is: operate fairly and do the
right thing for our customers. While Mecherle’s vision is still intact today their mission is to be
the first and best choice in the products and services they provide.

The company along with their vision has a mission to help people be able to manage the
risks of everyday life, get through and recover from the unexpected, so they can be able to
realize their dreams. They are people who make it their business to be good neighbors and to
keep the promises they make, while selling their products and service. The State Farm Mission
statement is:
“Our mission emphasizes building strong communities, communities in which we can and want
to do business in.” (Our goal is to strengthen existing relationships and develop new ones with
nonprofit organizations that meet our philanthropic focus areas.)

Along with their mission State Farm has set goals along the way to help them
accomplish what they have set out to do all while maintaining their founders, vision and staying
true to whom they are as a company.

They have several goals involving safety, education, company partners, and grants.

1. Safety- their programs promote child passenger safety, teen driver safety, seatbelt
safety and sober driving. These programs consist of $3.25 million in grants to schools
with their safe driving program.

2. Educational programs- these are fulfilled threw service-learning programs, partnerships,
and grants threw partner organizations such as Achieve, Alliance for Excellent Education,
American’s Promise Alliance, Council For Economic Education, National Board for
Professional Teaching Standards, etc.
-State Farm also impacts classrooms by supporting teachers with National Board
Certification with $5 million to this partnership.

3. Partnerships- This company is a member of the American Disaster Giving Program and
donates $1 million
-Also partnered with Habitat for Human since 1994, and in 2007 has officially been the
corporate sponsor of its youth programs with $1 million in grants yearly, plus additional
contribution to local Habitat affiliates in their communities.
-Threw Local Initiative Support Corporation State farm is able to provide grants and
loans to innovate economic development programs.
- Multi-cultural Partners promotes “Our promise to build safer, stronger, and better
educated communities extends to all our neighbors. And we team up with great
partners in the African American, Asian, Asian Pacific Islander, and Hispanic
communities to make good on that promise”.

Brief Explanation of their Communication Problems
State Farm is the leading home and auto insurer in the United States, along with
being a top in other types of insurance as well. They have built their company based on
being their for the customers an helping them deal with the unexpected events that
occur ever so often “Like a good neighbor” would. They have earned this reputation by
being reliable, and being able to communicate well with consumers, thus it has lead to a
lot of success and accolades no other insurance company has held within the last 70
years. State Farm has normally been a very reliable and trustworthy company, but as of
late, they have had a couple breakdowns in communications with their customers
regarding claims. They have had trouble properly communicating with customers over
unpaid claims, and the extent of what is covered in the policies they are paying for.
These accounts of unpaid claims and lack of communication have put State Farm in a
precarious position, and been under fire by not only the customers, but also criminal
investigators. This breakdown of communication occurred between the sub-company,
State Farm Lloyds, the entire State Farm Company, and it’s customers by allowing this
these claims to go unpaid, with no explanation as to why they are being denied, or even
an attempt to clear up the situation with all those who are involved in the matter.

Strengths, Weakness, Opportunities, & Threats
State Farm is one of the largest insurance companies in the nation, and to get there they
must have very good strength, but like all companies they have their weak points. Seeing as
they are still a growing company they will also have their opportunities to expand their business
and increase their profits, all while facing many different threats that could potentially harm
them as well.

Strengths: State Farm is one of the most know insurance companies, and that is
all thanks to their great marketing campaign which has helped them achieve various
rankings that differ based on the insurance policies. They are the leading home, auto,
and watercraft insurer in the country. They also rank in the top ten in the banking and
financial policies. That is all in part due to the marketing that they do, which allows
them to continue finding customers.
Another strength State Farm has is how recognized they are, and how loyal their
customers are to them. According to independent survey, they are the preferred brand
by a large margin. They have done this by being efficient and really catering to the needs
of its customers, especially the long time customers, all while providing solid handling of
their claims. To prove their dedication to providing good service, they have also
dedicated property and casualty companies in California, Texas, and Florida, which are 3
of state that are leading in catastrophes.

Weaknesses: State Farm has recently had an inability to turnaround its
underwriting operations, which has been limiting their ability to profit, because a few of
their companies have cost them some money. Combined losses that have come from
this have increased from $900 million to $2.6 billion dollars from 2010 and 2011.
They have also had issues with declining financial flexibility and strength which
has attributed to an increase in business risk.
State Farm is a mutual company which is restricting them from being able to sell
stocks and gain profit from that, as well as being able to pay for acquisitions. This has
led a decrease in its expansion.

Opportunities: State Farm has opportunities to increase profit, one of which
come from the aging population in the United States could cause an increase in demand
for their insurance products and services. The U.S. Census Bureau estimated that 20% of
Americans will be 65 or older, and along with the fact that three-fourths of those people
have no plan in place for a reliable income after they retire, and also the fact 40% of the
U.S. population is not insured, State Farm could explore into this market and gain more
customers.
Another opportunity they have comes from the growth of global property and
casualty insurance market is likely to increase revenue. With the value of the global
property and casualty insurance market projected at $1.6741 billion, which is a 29%
increase from 2010, and with the company’s reach, they could get into this market as
well which would be very good for the company as a whole.

Threats: With the global climate constantly being in a state of change within the
coming decades could be costly for State Farm. Looking back to Hurricane Irene in 2011
it cost them $26.1 billion in claims attributing to losses in the company’s profit. Natural
disasters are very costly for them, which is a very big threat.
Another threat is lower yields on long-term bonds could affect investment
income, which are likely to remain in the near future due to the Federal Reserve
creating Project Twist in 2011. It was created to sell $400 billion in short-term
treasuries, and to purchase the same amount in long-term bonds during October 2011
and ending in June 2012. This was done to keep down potential yields from long-term
bonds while short-term bonds remained unchanged.

State farm insurance company‘s communication strategy

It is well aware that State Farm Company is in business since 1922 and has earned a
well-known name in insurance industry. State Farm Insurance is company which works on
‘agent-based’ model and they are successfully able to communicate with their 17,000 agents,
their Facebook and Twitter Strategies and You Tube Channel.
The State Farm Insurance is using Velocity Communication Strategy that helps the
company to connect the company with their large number of target audience through the
variety of useful and very creative tactics. Velocity Communication Strategy of State farm
insurance focused on building the value in very areas. This is the reason that the company has
developed a three-step campaign –“Value a neighbor, Value an agent, and Value State Farm”.
Through this tagline, State farm Insurance sends a very clear message to the target audience
about their tactics and the strategies of the company. Velocity communication also provides
the company with necessary unbiased primary research as well as secondary. These are mostly
short surveys taken by an equal amount of male and female clients. These certain researches
are important to the company this size because it will point out what its customers agree and
disagree with as well as necessary changes and/or adjustments that need to be further
analyzed.
State farm Insurance uses social media strategy communication through which the
company publishes different types of the contents on you tube channel for engaging the
audience. They advertise threw well known and popular online media net works in hopes that
you will recognize them to add (face book) or follow (Instagram, Twitter, YouTube) by doing so
you are subscribing to their news feed, thus subjecting yourself too see all of their media
updates. This is a great way of reaching a younger generation audience the ones in high school
getting their first car and looking for affordable insurance. State Farm has not only innovated
electronically for its audience but their employees are also engaged in using the social media
resources for communication the message and reaching to the various people who wants
insurance. This makes the connection between the agents and targeted fast and efficient. It
allows that 24/7 availability which has really separated State Farm from some of its competition
coming up on top. This kind of innovation is not only beneficial to the company’s access to its
audience but it also markets the brand as well as the understanding to the audience that State
Farms is changing and innovating with the world of today for a better and in time service
available to them. Company uses Facebook, Twitter and You tube for reaching to the customers
and use the iPhone app and Mobile phone app to connect and help the customers.
There is no doubt that communications strategy of the firm helps in achieving its mission
and goal This strategy of the State farm Insurance demonstrate the value and needs of the
organization through providing a clear guidelines to its agents. This is very effective strategy
that makes it easy for the organization to establish its connection with its agents, neighbors,
and customers through effectively communicate the messages.

Current Communication Challenge
Recently State Farm had an incident that show that they have communication challenges
within the company, which involved the paying customers. They were under investigation in
2012, because of tens of thousands of hurricane claims they were not properly handled and
unpaid. This has led to lawsuits in which customers felt that State Farm Lloyds, a sub-company,
located in Texas, defrauded them. Documents have come into question because they were
denying their customers insurance claims regarding roof damage that occurs in high wind
events and hurricanes. State Farm knowingly covered up this policy, which did not provide
insurance on this, and also hid this from their customers as well. This event saved State Farm
close to a $1 billion, and all the while they had customers believing that this would be covered,
when they began paying for this type of insurance. This is unacceptable because those paying
customers have a right to know the extent of the coverage they are paying, and shows the lack
of communication by the State Farm sub-company. For a business let alone an insurance
company information like that has to be in communication with their customers, so them as a
large, well-known and respected company does not have to deal with fraudulent charges, and
lawsuits which could cost the company a lot of money, and credibility. They should have been
very direct with customers what exactly the policy covers and what it does not, before they
agreed to give their money to State Farm. Another event in which lawsuits were filed against
State Farm occurred in late 2013, in which four people also sued the company over unpaid
claims. This time they have refused to pay the customers claim, which was sustained during an
auto collision. Since then, they have made no contact to the customer, and have shown a
failure to respond to his claims. This again is something that should not happen for an insurance
company, because this is your line of work, and considering their motto is, “Like a good

Solutions to the Problems
Neighbor, State Farm is there”, they should have constant communication with customers
when they make claims for insurances they have been paying for. When they don’t the
company begins to look bad and unreliable when you need these claims the most.

Solution 1: State Farm needs to be very direct and clear with customers with what they
are getting when they join State Farm. The have to talk to the consumers what exactly their
policies will cover, and how much of it they will cover, to avoid lawsuits, and other criminal
investigations. That way the customers know what they are paying for and what they will get, in
the event that such an occurrence take place. The need to communicate as much as possible
with customers, and explain to them step-by-step everything that this type of insurance will
cover, so there is no communication errors in the future that will end up potentially costing as
much as these incidents.
Solution 2: State Farm know that such event will take place, considering they are an
insurance company, and cover whatever it is the customer needs. If they have been paying, the
customer has every right to make those claims and the money they need to cover the
accidents. There motto is “Like a good neighbor, State Farm is there”, so they need to pay every
single claim, no ifs, ands or buts, because they will gain more customer, and customer loyalty,
thus they will able to generate more profit by being an honest company. This again requires
them to be on top of it all regarding the details of the claims and how long it will take them to
get it to the consumers, requiring a strict and swift form of communication with customers.
Solution 3: Obviously State Farm can’t possibly cover every single claim placed, but
State Farm should be responsible and accountable for claims they entitle to ensure. So a quick
solution to their problem would be to not only give a brief statement of the clients policy to the
client, but to be specific and detailed as to what the policy covers by creating small open work
shops where they go over new and personal policy’s. Where they won’t only inform the client
about their current policy but also might entice them to get a new one. This will allow the
agents to sit down and explain to the client their policy instead of just mailing to them. These
programs may take more time of the agents but in the end the customer leaves with the
satisfaction of knowing exactly what is in their policy because of the verbal communication and
in hand statement. This gives the client a better understanding as to what they are getting in
return for the premium they are paying. Not only does this help the client but it also protects
Sate Farm in case a client claims to a claim which isn’t covered by their policy they can simply
go in and say that the reason they won’t cover it is because it’s not in the policy and not have to
worry about being sued nor create a bad customer reputation.
Solution 4: State Farm should make safe accounts for their customers for these types of
situations that occur, and considering they specialize in preparing or being ready for the
unexpected would be a very smart move by State Farm.
Solution 5: State Farm is great when it comes to donating but they should cut back
some to be able to have money to pay their customers when they need their claims. With more
money set apart for their customers, donating still could be done just in extravagant sums of
money.
Conclusion
Although State Farm is the leading insurer in the nation, being in the top 50 of the
Fortune 500, they must do a better job communicating with the paying customers, regarding
their policies, what they cover, what customers are really paying for, as well as answering any
and every question and being prepared to pay the claims customers make, all while handling
them swiftly and efficiently to really provide great service to the customers. If a lack of
communication continues, State Farm could find themselves in a bad position, constantly being
sued, and being under criminal investigations regarding fraudulent charges made against them.















Bibliography

https://www.statefarm.com/about-us/company-overview/company-profile/state-farm-story,
Retrieved April 22, 2014

http://marketingmix.org/swot-analysis-of-state-farm-insurance/, Retrieved April 22, 2014

Greenblatt, Mark. http://abcnews.go.com/US/state-farm-faces-criminal-investigation-
hurricane-claims/story?id=17167218, Retrieved April 22, 2014