1 Car Insurance Company Claims To Have Saved Its Customers Over $4 Billion Last Year
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The year 2020 was a bit unexpected for everyone, but State Farm helped to make things a little easier by saving customers money and lowering car insurance premiums.
With State Farm’s Good Neighbor Relief Program, introduced last year in response to customers driving less and thus putting in fewer claims, the company paid about $2 billion in policyholder dividends to State Farm Mutual car insurance customers, according to the company’s reported 2020 financial results. The report stated:
“We strive to help more people in more ways. In an unprecedented year like 2020, we focus on our core mission to help people manage the risks of everyday life, recover from the unexpected, and realize their dreams,” said Senior Vice President, Treasurer and Chief Financial Officer Jon Farney, in State Farm’s report on its 2020 financial results. “The Good Neighbor Relief Program is a testament of our commitment to our policyholders and communities. Whether premium relief, dividends to State Farm Mutual auto customers, payment flexibility or philanthropic efforts in the communities we live and work, we’re focused on relief and recovery efforts.”
The program also helped to provide premium relief for other car insurance customers, lowering premiums by an average of 11% nationally, and saving customers another $2.2 billion over a six-month policy period.
How is State Farm doing financially?
The State Farm P-C group of companies (primarily engaged in automobile, health, homeowners, commercial multiple peril, and reinsurance lines of business) saw significant growth in 2020, with a reported earned premium of $65.1 billion.
According to Corporate Finance Institute, “earned premium” refers to the premium earned on the portion of an expired insurance contract. Once a contract expires, the insurance company is no longer assuming any financial risk, so the premium is considered earned.
In addition, State Farm reported a combined underwriting gain of $1.9 billion, the company says it paid $1.9 billion in dividends to policyholders.
Also according to State Farm’s 2020 financial report, “the underwriting results reflect lower auto lines incurred claims offset by returns of value to customers in the form of lower premiums, along with an increase in homeowners incurred claims.”
Interestingly, the company also reported:
- A total revenue of $78.9 billion for 2020 compared to $79.4 billion for 2019.
- Net income of $3.7 billion in 2020 compared to $5.6 billion of net income in 2019.
- A net worth at year-end 2020 of $126.1 billion compared with $116.2 billion at year-end 2019.
- A significant increase in the value of the P-C companies’ unaffiliated stock portfolio, driven by increases in the U.S. equities market.
State Farm is still a leader in car insurance
In 2020, car insurance represented 62% of the P-C companies’ combined net written premium.
Other stats on State Farm’s car insurance business last year:
- Earned premium was $41.3 billion
- Incurred claims and loss adjustment expenses were $27.6 billion and all other underwriting expenses totaled $10.1 billion.
- The underwriting gain was $3.5 billion and dividends to policyholders totaled $1.9 billion.
A name car insurance customers trust
With the State Farm insurance operations consisting of 11 P-C companies and two life companies, State Farm is one of the largest and most trusted insurance companies in the country.
The company’s 2020 financial report seems to indicate that State Farm worked to reduce costs on car insurance premiums while still experiencing growth in auto policies.