A $7 billion annual underwriting loss on auto policies in 2016 is driving State Farm Mutual Automobile Insurance Co. to close 11 U.S. facilities over the next four years, displacing approximately 4,200 workers. Law firms that are members of the State Farm Panel Counsel program for auto insurance will want to monitor this situation closely.
Work from the closed facilities will be centralized in the Bloomington, Ill. headquarters of State Farm, as well as its offices in Atlanta, Dallas, Phoenix, and other undisclosed locations across the U.S.
An increase in automobile accidents has caused a surge in claims expenses. More drivers are on the road, and they are driving more miles than ever before. Additionally, distracted driving due to the use of electronic and dashboard devices remains a serious concern and a leading cause of car accidents.
Auto repair costs continue to rise and auto insurers are finding profitability challenging to achieve. (See our recent blog post titled, “Distractions Drive Up Auto Claims.”)
At State Farm, net income dropped to $400 million last year from $6.2 billion in 2015 net income. This was largely due to the auto insurance results.
State Farm Office Closure Schedule
The insurance company’s planned exit strategy is listed below.
2018 Office Closings: Parsippany, NJ and Petaluma, CA
2019 Office Closings: Kalamazoo, MI, Irvine, CA, and Tulsa, OK
2020 Office Closings: Indianapolis, IN, Medley, FL, Downers Grove, IL, and West Lafayette, IN
2021 Office Closings: Bakersfield, CA and Frederick, MD
State Farm’s office closures are part of an overall plan to reduce costs. The insurer hopes to gain efficiency through streamlining and improving processes, leveraging technology, and concentrating employees in larger locations, according to State Farm’s official statement.
State Farm is the largest provider of auto and home insurance in the U.S., with more than 84 million policies and accounts. The State Farm auto insurance business represented 63 percent of the insurer’s combined net written premium in 2016.
State Farm Panel Counsel for Auto Insurance: Implications
Insurance defense law firms that serve as State Farm Auto panel counsel in the affected geographic areas (and elsewhere) will want to take a number of precautions, some of which may include the following.
- Try to stay close to the claims professionals in your local State Farm claims center. An open line of communication may help the law firm to understand the timing and nature of the insurer’s reorganization plans.
- Another reason to stay close to State Farm claims professionals in the offices targeted for closure is that they are either likely to move to the newly consolidated locations, or move to another carrier. While they are not likely to have authority to hire panel counsel members, your claims contacts may be able to provide you with an insider’s perspective and / or a reference.
- If a law firm is heavily reliant on claims files from the State Farm panel counsel program for auto claims (say, 25 to 30 percent of the law firm’s revenues), now is a good time to start looking for more panel counsel appointments. It can take months to get on more panels, and the time to start seeking new business is before the law firm is at risk.
- Consider that your law firm is not the only State Farm panel counsel member scrambling to prepare for the future. Give some thought to differentiating your law firm from competing firms that will be seeking the same work. Metrics might be one way to stand apart, particularly if your law firm has metrics like average time to close a case or average cost of an auto claims file (perhaps adjusting for complexity and severity as needed).
- Invest now in professional marketing materials and guidance to help your law firm gain a competitive advantage. Bringing in skilled outside resources can help accelerate your business development cycle.
More Auto Insurers Struggle with Higher Claims Costs
State Farm is not alone. Allstate Corp., Hartford Financial Services Group Inc. and Warren Buffet’s Berkshire Hathaway Inc. are also among the insurance companies dealing with the effects of higher claims expenses.
Insurers are looking for ways to remain profitable in the face of high auto claims expenses. Companies are charging more for coverage and utilizing other strategies to decrease cost.
Legal Marketing Help for Insurance Defense Law Firms
If your insurance defense law firm is asking how you can get on more insurance panels, give us a call. We have helped more than 100 insurance defense law firms pursue new panel counsel clients.
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- We are the leading U.S. legal marketing agency specializing in the insurance defense market. We know the panel counsel process, and focus on helping you get new engagements.
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- Increase revenue with professional, on-going legal marketing campaigns. We do the research to identify insurance panel managers, so you can accelerate your business development process.
Disclaimer: Information in this article is taken from various company and industry news sources, and is believed to be reliable.