06/05/2020
6/5/2020
STATE FARM ANNOUNCES A DIVIDEND OF UP TO $2 BILLION FOR STATE FARM MUTUAL AUTO POLICYHOLDERS!
Earlier today a decision was made to authorize a policyholder dividend to the State Farm Mutual policyholders of up to $2 billion in recognition of our auto claim trends. Agents and contact centers will receive more details about this decision soon.
What is underlying the $2 billion headline number is even more important. This dividend represents roughly 25% of the auto premium for the period of March 20 through May 31. It is important to know that the percentage of premium will vary by state, depending on the auto claim trends for that state. The overall range in the percentage reductions will be 15% to 30%.
The primary method of delivering this dividend will be as a credit against future premium owed by our policyholders. By taking this approach, our customers with outstanding balances will receive lower bills reflecting the dividend, including those customers who have deferred payments because of their financial hardship.
We still have some work to do for our auto policyholders insured by State Farm Fire & Casualty. State Farm’s intent is to recognize the reduction in auto losses for these customers as well and we are working with the Oregon Dept. of Insurance to make this happen.
We will continue to monitor our auto loss experience and assess whether additional actions should be taken for the period after May 31st. The dividend is part of the Good Neighbor Relief Program that also includes customer payment options and neighborhood philanthropic relief. All of these actions to provide relief to our customers are enabled in part by our financial strength and leadership. - Michael Tipsord, CEO of State Farm Insurance Companies
4/13/2020
QUESTIONS AND ANSWERS
Q – Who will receive a dividend?
A – Every Mutual Auto policyholder with an auto policy in-force between March 20 and May 31, 2020, will receive a dividend. We anticipate State Farm Fire & Casualty Auto customers will also receive credit to their policies. State Farm will work with the Oregon Dept. of Insurance to authorize these payments.
Q – What type of policies will receive a dividend?
A – State Farm Mutual Auto customers with Personal lines Auto, Motorcycle, RV, Business Use Personal Auto, Commercial Auto, School Bus and Antique/Classic policies will receive the dividend as premium credit.
Q – Do customers need to do anything to receive their dividend?
A - Customers do not need to take any action to receive the dividend. The credit will be applied automatically.
Q – When will customers receive their dividend?
A – We anticipate customers will start seeing these premium credits beginning as early as June.
Q – Can customers get a check instead of a credit?
A – No. The intent is to provide the dividend in the most cost-efficient manner – applied as a premium credit to outstanding or upcoming bills.
Q – How is each customer’s dividend amount determined?
A – The amount received by each policyholder is a percentage of the policyholder’s premium owed for the period between March 20 and May 31.
Q – How much dividend credit will customers receive?
A – The amount received by each policyholder is a percentage of that policyholder’s premium owed between March 20 and May 31. Percentages will vary by state, ranging from 15% to 30%, depending on the projected loss experience for that state. This dividend amount will be about $20 per month for each vehicle insured. The early indication for Oregon’s percentage is 25%.
Q – What is the total dividend amount and how was it determined?
A – Up to $2 billion is appropriate based on the claim and driving behaviors during the COVID-19 period. It positions the company to maintain its financial strength while continuing to serve customers and deliver on the promises we make to be there when the unexpected happens. The amount was determined by indications of the lower loss costs due to less driving in this time. State Farm Mutual, as a Mutual company focused solely on serving customers, was able to provide this dividend, at an average of 25% of the premium for our customers.
Q – Does the return of this dividend increase the likelihood that State Farm Mutual rates will be increased in the near future?
A – No. Future rates are based on expected future costs. The dividend will have no impact on future rates.
Q – Why doesn’t State Farm just reduce rates for customers?
A – The Good Neighbor Relief Program is in response to our customers driving less and having fewer accidents, as they help prevent the spread of COVID-19. Providing a dividend allowed us to move quicker for the majority of our customers than going through a rate filing process in each state. Rate changes can take over a year to impact customers and we looked to provide relief quickly, which the dividend allows. We can act in this way again, if the situation warrants, to provide relief for our customers.
