State Farm has informed employees of a new voluntary exit program.
In an email obtained by WGLT, the Bloomington-based insurer says "if and when" changes are needed, the company will start with voluntary staff reductions whenever possible, but did not rule out the possibility of layoffs.
A State Farm spokesperson said the move is intended to give employees more choice when business areas need to make staffing adjustments.
“These changes are part of our continued efforts to shape a stronger, more flexible organization for the future," State Farm spokesperson Gina Morss-Fischer said. “Each business area will determine if, when, and how it would plan to use the new program and process based on its needs.”
The company is not saying when staff changes may be coming and how many jobs could be eliminated.
Morss-Fischer added State Farm employees about 13,000 people in McLean County, a number that’s been stable for a number of years.
“We do not anticipate those numbers to change significantly,” she said.
The last voluntary exit plan State Farm offered was in 2017.
Still No. 1
State Farm remains the No. 1 auto and property insurance company in the U.S., though its lead in the auto insurance market is shrinking.
Insurance industry analyst Gerald Glombicki is a senior director at Fitch Ratings. The ratings agency predicted in 2023 that rivals Progressive and Geico were going to surpass State Farm at the top of the auto insurance market. That hasn’t happened, but Progressive has moved to within a 1 percentage point market share as of the end of June, according to Glombicki [19% to 18%].
Glombicki said Progressive has used marketing to gain ground on State Farm, but suggested they won’t cut rates just to eclipse State Farm at the top.
“They’ll only be interested in growing to the No. 1 spot if they can do so profitably,” he said.
Glombicki said State Farm’s dominance in the property insurance market could withstand any market loss in auto policies, and he said State Farm’s customer service — embodied in its “Good Neighbor” branding — should remain its calling card.
“Customer service is the No. 1 retention tool for all insurance companies,” he said.
Insurance shifts
Glombicki said many insurance companies are using AI and other technology to lower payroll costs.
“I think a lot of companies are looking at this as a way to not necessarily do layoffs, but maybe offer early retirements, or some early exits for some people who just needed a little nudge [to retire],” Glombicki said in an interview on WGLT’s Sound Ideas.
Glombicki said it’s hard to predict how much impact AI will have on the insurance workforce long term, but said many insurance companies are using AI for customer service, fraud detection and some claims processing.
The last two years, State Farm reported $20 billion in underwriting losses, while its net worth grew to $145 billion.
Glombicki said those underwriting losses, due in part to natural disasters, are a long-term concern.
“Its homeowner [policy] shares is still going to make it the No. 1 carrier, but certainly profits matter. You only operate an underwriting loss for so long and count on your investment income,” Glombicki said.
Glombicki said State Farm and other insurers continue to struggle with how to best manage costs when providing insurance in coastal areas, where the risk of wildfire, earthquakes and hurricanes is concentrated.
“If you can get insurance at a price point that’s fair, then it’s easy. The question is what’s fair,” he said.
State Farm has paid out billions of dollars to policyholders in California this year due to massive wildfires. That came shortly after regulators in that state approved emergency rate increases of 22% for homeowners and 15% for renters.
