The following market analysis focuses on the insurance industry in the United States and the largest operator in the market, State Farm Insurance Companies. The competitive landscape and market share of the United States insurance market is discussed. The company is analyzed in terms of strengths and weaknesses, and market position. Finally, recent marketing strategies will be discussed and analyzed.
Company Profile: State Farm Insurance Companies
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One State Farm Plaza
Bloomington, IL 61710 USA
Revenues: $ 31,664 million 2007
$ 35,037 million 2006
Chairman and CEO: Edward B. Rust Jr.
State Farm Insurance operates through multiple subsidiaries to market life, health,
property, and casualty insurance, banking, and other financial services.
Overview of the United States Insurance Industry
The insurance market includes two sectors, life insurance and non-life insurance. The life insurance sector includes life or mortality protection and annuity products. The non-life insurance sector includes accident, health, and property and casualty insurance. In 2007 the US insurance market accounted for 33.6% of the global insurance market, following Europe. The total amount of revenues from premiums for the US insurance market was $ 1,240.1 billion. The non-life sector accounted for 53.4% of the market share, while the life sector accounted for 45.6% The industry grew at a rate of 4% from 2003 to 2007, but is expected to decline slightly from 2007 to 2012. The three largest competitors in the US insurance industry were State Farm, AIG, and Metlife. (Datamonitor, November 2008) State Farm Insurance Companies
State Farm Insurance Companies
In 2007 State Farm Insurance contributed the largest portion of value of the United States insurance market followed closely by AIG and Metlife. State Farm operates through 11 subsidiaries targeted toward specific products and specific markets. The primary subsidiary markets automobile and homeowners insurance in the US and int three Canadian provinces.
State Farmer Federal Savings Bank provides deposit, credit, and loan services. State Farm Mutual Auto markets health and disability insurance through a collaboration with Assurant Health. Another subsidiary works in collaboration with Lloyds. State Farm has subsidiaries that operate specifically in the states of New York, Connecticut, Wisconsin, Texas, New Jersey, and Florida. State Farm mutual funds and variable products are managed by the State Farm Investment
Competition in the insurance industry is notable for the large volume of companies that market similar products, therefore branding and name recognition is an important competitive concern. Buyer power is a significant competitive factor. Relatively low switching costs coupled with the ease and speed of online price comparison and buying have greatly reduced existing companies coupled with product similarity by virtue of regulation serves to limit the number of new entrants into the market.
In addition to being the top company in the US market, State Farm is among the top 10 in the global insurance market and is the largest property and casualty insurer in the world. State Farm’s banking subsidiary is one of the largest US banks with assets of $15.9 billion in 2007. (Datamonitor, December 10, 2008) The corps of exclusive agents and dedicate companies in several states have helped to maintain customer loyalty and increase brand recognition. Use of the internet has allowed State Farm to capitalize on the customer segment that prefers to buy and manage policies online, and forego the agent-customer relationship. The investment management and mutual fund subsidiary is part of a growing asset management industry. Combined with insurance and banking, this business strategy allows State Farm to offer a wide range of financial services and build greater customer loyalty and brand recognition.
State Farm’s challenges have come from a weakening economy and from an increase in natural disasters and litigation resulting from claims resulting from those natural disasters. As a result of Hurricane Katrina State Farm has suspended operations in Mississippi in 2007, where it was the largest homeowners insurance company. Most recently, State Farm has suspended homeowners insurance in Florida after being denied a 47% rate increase. (Morning Edition, January 28, 2009) Between 2002 and 2007, State Farm suspended it’s writing of homeowner’s insurance policies in 17 states. (Datamonitor December 10, 2008) During those same years, however, State Farm continued to increase its marketing campaigns to target new customer segments, and combat the competitive marketing efforts of companies such as Allstate and GEICO.
Marketing Campaigns and Strategies
With declining position in the auto and other target market segments State Farm launched a massive advertising campaign in 2004 and continuing through 2006. In 2004, the “True Stories” advertising campaign featured real agents and actors depicting specific claims situations. This campaign was so successful that it aired during the Super Bowl of 2006. In 2005, State Farm became the official sponsor of the NCAA Championships in a collaboration with the NCAA and CBS Sports. Finally, in the Fall of 2006 State Farm entered into a three year collaboration with the NFL for exclusive sponsorship of the NFL Pro Bowl game beginning in 2007. These strategies expand on State Farm’s popular and well known slogan, “Like a good neighbor, State Farm is there.” Read also a project report on life insurance company
State Farm’s management realizes that advertising strategies and marketing campaigns must be supplemented with operational strategies that will maintain and enhance the company’s market position. In the 2007 Annual Report, Chairman Edward B. Rust Jr. stated “Yet simply being a good neighbor in today’s competitive market is not enough.” This statement is followed by the commitment to provide cost effective and time efficient services by enhancing the website as a customer service and sales tool. The statement also affirms the need and plans to respond to diversity and changing demographics in the market.
State Farm Insurance Companies will continue to be a leader in both the US and global insurance industries. Legal and regulatory issues limit some State Farm agents ability to cross market products and services. Therefore, the company will need to enhance marketing of banking and investment products to existing customers. Like many of it’s competitors State Farm must also enhance it’s positioning in other areas of financial services. State Farm is already positioned in the banking and mutual fund investment sectors. The company’s website is designed to capitalize on ease, speed, and low switching cost in banking and investments as well as insurance. With the reduction in homeowners policies and increasing banking and investment potential State Farm can maintain and enhance it’s market share and value.
Dinger, E.. (2007). State Farm Mutual Automobile Insurance Company. Encyclopedia of Major Marketing Campaigns, Vol. 2. (pp. 1571-1574). Detroit: Gale. Retrieved February 27, 2009, from Gale Virtual Reference Library via Gale.
Datamonitor. (2008, November). Insurance Industry Profile: United States, Retrieved February 20, 2009, from Business Source Premier database.
State Farm Abandons Florida's Homeowners Market.(11:00 AM-12:00 PM)(Broadcast transcript)(Audio file)(Brief article). (Jan 28, 2009). Morning Edition. Retrieved February 27, 2009, from General OneFile via Gale.
State Farm Insurance. (2009). Annual Reports. Retrieved February 20, 2008, from http://www.statefarm.com/about/media/annualrep.asp.
Datamonitor. (December 10,2008). Company Profile: State Farm Insurance Companies. Retrieved February 20, 2009, from Datamonitor Company Profiles Authority database.
Do you know that
a, no-fault insurance is optional for owners of a vehicle
on Marketing Analysis, State Farm Insurance Companies
The State Farm Insurance Cos. is one of the leading companies in its industry. State Farm Insurance Cos. maintains its dominant position in market by critically analyzing and reviewing the SWOT analysis.
As one of the leading companies in its industry, State Farm Insurance Cos. has numerous strengths that help it to thrive in the market place. These strengths not only help it to protect the market share in existing markets but also help in penetrating new markets.
Strong distribution network – Over the years State Farm Insurance Cos. has built a reliable distribution network that can reach majority of its potential market. Highly successful at Go To Market strategies for its products. Strong Brand Portfolio – Over the years State Farm Insurance Cos. has invested in building a strong brand portfolio.
Following are the Opportunities in State Farm SWOT Analysis: 1. More focus on retirement insurance and pension policies 2. Buoyant asset management market 3. Mutual funds offer a strong growth opportunity for the firm.
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