BUSI 522 Term Paper>State Farm Mutual Automobile Insurance Company study guide
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Course
BUSI 522
Institution
Columbia College (CC
)
Term Project Part A – Organizational Analysis
Organizational Description
Organizational Environment
State Farm Mutual Automobile Insurance company was founded in 1922 as a “single-line
auto insurance company” (State Farm Story, 2017.) Today State Farm Mutual is a parent
company with subs...
State Farm Mutual Automobile Insurance company was founded in 1922 as a “single-line
auto insurance company” (State Farm Story, 2017.) Today State Farm Mutual is a parent
company with subsidiaries and affiliates that offer approximately 100 products over five lines of
business: property and casualty insurance, life and health insurance, annuities, mutual funds and
banking products (Fast Facts, 2017.) For the purposes of this paper I will be focusing on the
property and casualty line of business, which offers automobile and homeowners insurance. As
of December 31, 2016, over half, 45 million, of the 84.4 million total policies and accounts were
Auto policies - 28 million were fire (homeowners.) They use exclusively contracted independent
agents for distribution and a large portion of marketing. State Farm’s mission statement is:
“The State Farm mission is to help people manage the risks of everyday life, recover
from the unexpected, and realize their dreams. We are people who make it our business to
be like a good neighbor; who built a premier company by selling and keeping promises
through our marketing partnership; who bring diverse talents and experiences to our work
of serving the State Farm customer. Our success is built on a foundation of shared values
— quality service and relationships, mutual trust, integrity and financial strength. Our
vision for the future is to be the customer's first and best choice in the products and
services we provide. We will continue to be the leader in the insurance industry and we
will become a leader in the financial services arena. Our customers' needs will determine
our path. Our values will guide us.” (State Farm Mission, 2017)
State Farm has almost 19,000 agents and 70,000 employees (Fast Facts, 2017.) Agents advertise
and distribute policies, they are regulated but allowed autonomy in many aspects of their
business. Since Agents are independent contractors, they are motivated to uphold the companies
mission of managing risks and realizing customers dreams to remain relevant and profitable.
, STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY 3
They are supported by the underwriting and support employees. Recovering from the unexpected
is a promise upheld by claims employees who process an estimated 39,000 claims a day in 2016.
Based on my personal experience, State Farm has internal positions that require a wide
range of education from a high school diploma to specialized degrees and certifications
depending on the position, but they also provide courses, training and resources to comply with
federal, state and product regulations. Continued employment is contingent in meeting and
maintaining regulated standards. For example, they pay for continuing education through an
outside source to comply with state licensing regulations as well as licensing fees required for
claims employees. I was unable to find any education or certification required to become an
agent, but due to the heavy regulation of insurance, annuities and financial products I feel these
are requirements the path to agency assists Agents in fulfilling.
State Farm releases a summary of their annual reports, the 2016 annual report lists total
assets of $38,118 million for insurance subsidiaries (State farm Annual Report, 2107.) In the last
ten years State Farm has sold most of its real estate holdings to remain liquid and fund a large
reorganization. For example, the building I work in was sold three years ago and leased on a
fifteen-year contract with opt out language every five years. This move has allowed auto and fire
claims and underwriting more adaptability in the changing climate of insurance. The assets
include tangible and intangible assets such as policy reserves, equipment, claims and
underwriting technology/software, and catastrophe resources.
The insurance industry is heavy regulated by The National Association of Insurance
Commissioners (NAIC) and state Departments of Insurance. The NAIC provides national
solvency standards, oversees processes for company licensing, rate and policy form
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