Q&A with State Farm VP: Getting Leaner, Insurtech Disruptors, and Change Management
State Farm faces stiff competition on two fronts—from longstanding challengers like Geico and Progressive, and now from insurtech startups like Lemonade.
The area within State Farm that's tasked with keeping an eye on all these external competitive pressures is called Strategic Resources. They look to understand trends occurring in the insurance business and beyond, hoping to turn their research into insights that company leaders can act on.
GLT's Ryan Denham recently sat down with State Farm Strategic Resources Vice President Laurette Stiles. Here's a transcript of their conversation, lightly edited for length and clarity:
GLT: From the outside looking in, the public only sees bits and pieces of the State Farm restructuring. It’s hard to see the whole. What is State Farm trying to accomplish with all of the changes?
Stiles: Our commitment at State Farm is essentially to our customers. What we’re trying to do is anticipate their needs and provide products and services that meet those changing, evolving needs. And we want to do assuring that what we do is offered at a competitive price, and that experience they have with SF is easy. it's simple. It's seamless.
So in Strategic Resources, what we do is we try to monitor those monitor those external trends in that environment. Many of the changes we're making at State Farm are being driven by these outside influences. Whether it's the exciting enhancements and changes in technology that influence customer expectations, whether it's the increasing pressures from a competitive standpoint, that really require all companies to look at the way they operate, and assure that they are efficient, in the way they develop and deliver solutions.
These are all important considerations for companies in the marketplace in general, and they're certainly driving a lot of the decisions and actions we're taking at State Farm.
In your most recent annual financial statement, your CFO said State Farm wants to become a "leaner and stronger" company. In what ways is State Farm not lean enough?
So being leaner, being stronger, what that really is about is the way we approach our processes and our work. Many companies are involved in driving toward greater efficiency. That's really what it's about for us. It's about understanding our customers' expectations and knowing that competitively priced products are part of that expectation.
We want to be about delivering solutions faster. So driving pace is another important part of being lean and efficient. Clunky processes take longer to deliver and develop. And so we're all about driving faster pace, driving better solutions for the benefit of the customer.
What’s an example of a clunky process you’re addressing?
In general, the way we approach work from a business and an IT standpoint has much improved. At State Farm, we've made some changes in IT, where we've condensed three departments into one, for example. That's really designed to help us be a leaner, stronger organization, to help improve efficiency so that this one IT organization is driving toward the desired results in working with our business areas who are responsible for really understanding customer needs and developing customer-centric products and solutions.
To me, the example there is business and IT working more efficiently together, because we have streamlined the way we do the work across those two areas. And we're able to deliver faster, better solutions to our customers as a result.
IT jobs are notoriously hard for insurers to fill. Many insurers are adding IT jobs. Why is State Farm an outlier here?
State Farm is actually heavily invested in information technology and the solutions we develop through IT. So even though we're reducing positions in Bloomington, we're adding hundreds of positions in our hub locations in Atlanta, Dallas, and Phoenix.
IT solutions are going to help drive better solutions for customers. And whether it be digital solutions, online—we're making pretty significant investments in helping our customers better interact with us and our agents to meet their needs over the long term.
There is a lot of uncertainty in Bloomington-Normal about what State Farm is doing. Are there misperceptions that you think need to get cleared up?
There are no plans to significantly alter our Bloomington presence or the location of our headquarters. Beyond that, we're constantly evolving and changing. As a Fortune 50 company, we are very much impacted by changing customer demands, by changes in technology, and by the pressures we feel from competitors in the changing business environment.
So as we think about the changes we need to make as an organization, we have to take both the large scale of what's going on, as well as a local-scale view.
How are you managing all of this change while trying to maintain employee morale?
We understand that these changes are very significant for the employees that they impact. We're committed to helping our employees and our agents both as they're impacted by these changes manage through them. That's a key priority at State Farm.
One way that we do that is by helping our employees and agents understand the context of the changes. So if change is sudden, if it's unexpected or unanticipated, it's much harder to manage through. What we want to do is, we want to talk with them, work with our employees, to help them understand the broader context of what's driving these changes outside of State Farm. And we want to help them understand what we're developing internally to meet the needs of our customers, to adapt to these changes.
For those who are personally impacted by change, we're doing everything we can to work with them through these changes that are impacting their lives.
State Farm has said repeatedly that Bloomington’s workforce will remain around 15,000. You have 67,000 employees nationwide. How will that overall headcount change?
First of all, change is constant. Evolution is constant. We expect change to continue to drive our organization forward. And we think change offers exciting opportunities to meet the needs of our customers, which are also changing.
The representation of our workforce—how many employees we have, where they're located, what facilities they're in—that is always going to be driven by what our customers need from us. Where they need us to be. How we align the right people in the right places to do the right work for our customers.
Those numbers will change and evolve over time as they always have. But what drives us as an organization is a commitment to our customer, and the growth, the financial stability, the profitability of State Farm, because without that, we can't be there for our customers.
It sounds like there's not a target number you're trying to hit.
It's a broader conversation, it really is.
With products and services, consider how many people we need to do that, how can we do most efficiently, and how does that impact the price of our product? Customers are interested in our products when they're competitively priced. That's all part of the equation.
Let’s connect the dots here. How do these changes make you more competitively priced?
So at State Farm we do watch traditional competitors. We have our eyes on all of these competitors. And we know they have their eyes on us.
But it's not just the traditional property-casualty insurers and financial services providers. It's the new entrants to the market. It's the startups. Those who are leveraging technology like AI to offer new types of products, or new ways for customers to interact with companies.
What we're excited about as an organization, we are structured in such a way that we actually have an innovator and a startup mentality. And we have areas of the organization now that promote that startup mentality. We have a group that looks at startup opportunities, and we're actually trying to foster some of these startup opportunities from within our own organization.
An example is to look is HiRoad, within the State Farm organization. It's a startup that is offering an auto insurance product in Rhode Island. What's different about the business model for HiRoad is we're leveraging technology to offer a different kind of product. It's auto insurance, but it's based on the way customers drive. And through smartphone technology, customers can actually in real time monitor the way they drive, and they can adjust their driving practices to impact their rate in real time. It's just a different kind of business model. But it's leveraging some of the new technologies that are out there.
I've interviewed several analysts and researchers to get some insight about State Farm and its role in the marketplace. One person I spoke to said State Farm was a little bit late to the game when it comes to some of these digital technologies, but in the last few years has really caught up. Is that a fair characterization?
Well, I think State Farm does invest pretty heavily in not just leveraging technology, but investing in the resources—the people who know how to develop these new technologies and how to use them. Certainly we've had a heavy emphasis on digital technologies for the last several years. And we're developing more and more internal expertise in order to use and leverage these technologies.
Our commitment is not only to compete with our traditional competitors and where they're going. That's a constant race. We're watching our competitors. They're watching us. And we're all seeking to improve with an eye on the customer.
The reality is, there are so many influences from outside of our industry, with startups, these new entrants who are smaller, and who can leverage a certain aspect of technology to offer a different kind of product or a different way of providing service to customers. And our challenge as a large leader in the industry—we've been the leader in auto and homeowners insurance for decades—our challenge is to continue to meet the needs of a very large customer base, because we offer over 100 products and services, and we have over 84 million policies and accounts ... that scale gives us an opportunity to leverage our position to experiment with these new technologies.
So I don't think it's just keeping up digitally with our traditional competitors. But looking for ways to go past them, understanding that there are these new entrants out there.
You’re used to competitors like Geico, Progressive, and Allstate. But what is SF learning about insurtech startups like Lemonade—these ultra-lean, AI-driven insurance products that some are describing as potentially disruptive to more traditional P&C companies.
We keep an eye on all of those competitors. And we think there's a lot to be learned from the disruptors, or the new entrants to the market, who perhaps don't have a traditional way of thinking about the insurance business. But who have some very cutting edge ways of approaching the customer experience.
We are learning from them. And we're trying to position ourselves as one of the entrants to that market as well. I mentioned HiRoad, and the experiment we have going on in Rhode Island.
A big part of what Strategic Resources does, partnering with other groups within the organization, is to track these competitors and to understand what differentiates them. What about their offering, or the service they provide, or the technology they're leveraging, makes them somewhat unique? Is there something we can learn from that?
In any industry, disruptors are useful. they may not have, any one of them, a long lifespan. But they offer a different way of thinking about and approaching the business.
What's something you've learned from a disruptor?
Certainly the opportunity to drive pace. The expectations that customers have for responsiveness.
And by pace, you mean ...
Pace can be interpreted a couple different ways. Pace in delivery. Pace in solution development. As the customer needs change and adapt, we can't be years to get a product to market. It has to happen very, very quickly. That's obviously something we learned from some of these disruptors. You have a new idea, you have a new concept, you get it to market quickly.
HiRoad is a great example of a concept that we developed within State Farm to look at auto insurance through a new lens, get it out there in a market where they don't have it yet. We're operating very successfully on a very short timeline, with a very interesting experiment that we'll learn from.
What about other types of disruptors, outside the insurance industry? How are you adapting to the sharing economy and companies like Uber, Lyft, and Airbnb?
With that development comes new risks. Our customers are assuming these new risks. And they have a need for a company to meet those needs in insuring those new risks.
So the benefit of us watching this, and tracking this, and understanding this over the years, is we've been well-positioned to jump in as this has taken off.
Ride-sharing, for example. In 2016, we began offering an endorsement to our auto insurance policies that fills the gap that had existed between a personal auto insurance policy and the auto insurance that these transportation network companies, or TNCs, were providing. There was a gap there that created risk for our customers. So over the last two years we've been rolling out an endorsement that's now offered in almost every state.
On the home-sharing front, we're really excited that we have just recently introduced a new product to Illinois customers where if you want to share a room or a couple rooms in your home over the short-term through some home-sharing platform, you now can have coverage that allows you to do that for up to 30 days a year. For those find that it's economical or they're just interested in meeting new people and want to share some rooms in their home, we've anticipated the risk and the gaps in their coverage that might've existed, and we have a product that provides for that.
Let’s pivot to advertising and marketing. There are many different types of customers. There are price-motivated customers. There are customers with more complex needs, like life insurance or boat owners. How do you make decisions on advertising and marketing, in this marketplace, given all those different customer types?
I think a differentiator for us in the marketplace, and what helps us considerably with our marketing, is our business model. State Farm agents are at the core of the State Farm business model. It's our agents that really bring together this broad understanding we have of our customers and their wide-ranging needs. Because what agents do is, they know their individual customers. They're there to help customers make plans for their future, and to address the very complex and detailed needs that they have as individuals and families.
Agents also help customers during those difficult times when they need State Farm. They've had a loss. They experienced something unexpected. And our vision, of course, is to help customers manage through those unexpected losses and realize their dreams. Agents are unique positioned to do that, and they're a huge part of our plan for marketing and connecting with customers.
State Farm has increased its advertising spending in recent years. Why?
It's a competitive marketplace out there. There's a lot of visibility of traditional and emerging insurers in the marketplace. A lot of voices out there.
We don't really comment on our marketing spend. But absolutely State Farm is committed to getting our name and our voice out there in the marketplace. We know that it's crowded. We believe that given our market position, and given the very unique role that agents play with our customers, we're very well-positioned to stay visible and help customers understand how well-positioned we are to meet their needs.
How do you manage all of these changes within the company without alienating those State Farm agents who you say are so important?
Actually, our agents are enthused about many of the changes that we're making because they see the importance of an organization operating efficiently, streamlining processes, delivering more quickly solutions to customers.
Some of the solutions we deliver are to our agents, because they're the ones who are interacting with customers. Agents welcome many of these changes and these new technologies. Because it helps them service our customers better.
Whether we provide a competitively priced product has a big impact on agents and their ability to market and sell and service these policies.
It's very important that agents are kept up to speed on why we're making the changes and that they can anticipate the changes that are coming that will impact them.
How will the footprint of agents change in the coming years? Will we see fewer agents?
Currently we have nearly 19,000 agents servicing over 84 million policies and accounts. So we've got a broad range of products and services, and many, many customers out there.
As with our employees, our population of agents and where they're located and how they're positioned to support our customers is going to be driven by customer needs and by workforce and workplace realities. We have no specific goal in mind, but we do commit to assuring that we have agents in the right places to support customers and their needs.
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