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Analyst: A volatile year may delay State Farm losing title of nation's top auto insurer

State Farm headquarters
Emily Bollinger
State Farm has about a 16% share of the U.S. auto insurance market.

An insurance analyst projects State Farm will fall behind Geico and Progressive as the nation's top auto insurer.

Jim Auden, Fitch Ratings' head of property and casualty insurance, had projected the takeover this year, but now says that will likely be delayed after a difficult year for all auto insurers.

“Inevitably, Geico and Progressive will pass them up, probably not in ’23 based on this recent shift and trend, but those companies continue to (succeed) in their chosen business,” Auden said on WGLT's Sound Ideas.

Jim Auden
Andrew Collings/Andrew Collings/Andrew Collings Photography
Fitch Ratings: Jim Auden

Auden said Geico and Progressive are well positioned to challenge State Farm, effectively using risk selection and sophisticated pricing to maximize profits.

State Farm has a 16.4% share of the U.S. auto insurance market, according to Fitch. Geico is second at 14.7%. Progressive is third at 14.1%.

Auden said auto insurers enjoyed record profits in 2020 when people started driving less. He said claims rose dramatically over the last two years, along with higher costs for replacement parts and more litigation to challenge the costlier claims.

State Farm posted a net underwriting loss of $4.57 billion in the third quarter of 2022 in auto claims, according to S&P Global. The loss was reportedly $1 billion larger than State Farm’s worst quarter in 21 years.

Auden noted State Farm saw a 10% gain in auto premium value through the first nine months of 2022, outpacing Geico and Progressive — though he said that gain is likely due in part to rate increases.

“They are raising rates too,” Auden said of Geico and Progressive, “but their policy count growth has not gone up as much.”

Auden said even if State Farm is supplanted as the auto insurance leader, it should not be any cause for concern about the company’s strength.

“Maybe it’s bragging rights, mostly,” Auden said. “I would think State Farm has a very large number of employees and they will continue to in the future.”

In response to this story, a spokesperson for State Farm said the insurer is on pace for another record year of auto growth.

“We are proud to insure more personal autos than any other insurer and will continue to relentlessly focus on serving our customers,” State Farm public affairs specialist Gina Morss-Fischer said in a statement.

Are agents needed?

The rise of online insurance companies could prompt traditional insurers such as State Farm to reduce its number of agents over time, Auden said, but he stressed brick-and-mortar insurance firms will probably always keep some local agents.

“I can see that the share of local agents continuing to decline, but not entirely going away,” Auden said.

Recent surveys show State Farm scores better in customer loyaltythan Geico and Progressive.

State Farm is far and away the leading home insurer with 21% of all policies in the U.S. Allstate is second at 9%.

Auden said he doesn't expect State Farm’s top ranking in property to change anytime soon.

Eric Stock is the News Director at WGLT. You can contact Eric at ejstoc1@ilstu.edu.