State Farm is America’s largest insurance carrier. According to the Insurance Journal, they just reported a $7 billion loss in 2016, the worst loss experienced in their 95-year history. This comes after a $2 billion loss in 2015. What does this mean for you?
What is Behind the Auto Insurance Losses?
Several phenomena may have contributed to their auto insurance losses:
- Increased accidents from distracted drivers using smart devices
- Lower gas prices encouraging more car trips
- Increased cost of auto repairs
No matter what the cause, the truth is that State Farm is forced to find ways to remain soluble and keep their promise to pay future claims. In other words, they need more money after three years of underwriting losses.
How will State Farm get their Money back?
You’re probably thinking, “Holy guacamole! What does this mean for my premiums? Will they be raising rates?”
It’s possible. Consumer Reports suggest you be on alert. Shop around, be open to other insurance carriers, or choose a higher deductible.
State Farm has captured the majority of the auto market, so a lot of people could be affected.
Oh, and State Farm isn’t the only insurance company reporting major auto losses. AllState, the Hartford, and Progressive didn’t experience a good 2016 either.
My Personal Take
I’ve worked for a mass-marketed insurance company before. Some call it a direct broker. You know, the catchy jingle. The animal mascot.
Personally, I was extremely uncomfortable trying to consistently explain baseless premium increases to loyal customers.
These are the pleas I heard one too many times:
- “But, I haven’t had any claims!"
- "I’ve been a customer for 20 years!"
- "Why can’t you offer me a better rate? Aren’t you my agent?”
Yes, I was their agent. I did care about them. But even as a sincere advocate, my hands were tied by the nature of the business.
The problem with direct writers (AllState, State Farm, Progressive, etc.), is that they can't offer clients alternatives.
Direct writers don’t empower their agents with the flexibility to offer clients options.
What was my Action Plan?
I grew tired of being completely helpless and unable to make a difference for my clients. So I left my career as a direct broker and joined the Private Clients team at Sahouri Insurance.
Why I Chose SAHOURI.
Sahouri is an independent agency. Which means they can work with multiple insurance carriers. I provide clients with more options and now serve their best interests.
I ensure my clients receive the best bang for their buck; and not only when I first sell the policy. But every single year following.
If one of the companies we represent takes a huge hit and increases premiums, I have the freedom to proactively shop a client's policy to find a carrier that offers the same great coverage with a better price. It's a no-brainer.
What should your Action Plan be?
I believe that maintaining integrity and honesty is essential in being successful in any industry. So, I am in no position to advise you to ditch your captive/direct broker for an independent broker.
But what I will advise you to do is to explore. Learn more about the options available to you. Just because your agent is captive, doesn't mean you have to be too.