I start most Saturday mornings in the same way—I read Nicole Vinson’s blog, which is always very informational and entertaining, and I do some research on insurance practices around the country. This Saturday, I woke up in Missouri after settling a large residential fire loss against Start Farm. This got me thinking about insurance companies that write policies in the state of Missouri and wondering who wrote the most policies. Here is what I found:
According to the Missouri Department of Insurance, there are 163 insurance companies that are authorized to provide property and casualty policies to homeowners.1 As of 2014, State Farm had 26.63% of the market share, followed by American Family at 14.94%. This comes as no surprise to those that work in the insurance industry. These two companies are the ones most mentioned in conversations about property damage occurring to a home in Missouri. The next three companies are Safeco Insurance (5.42%), Shelter (5.41%), and Farmers (4.8%). The other 158 companies combine to write 42.8% of the policies, with 59 companies holding 0% of the market share. Meaning that there are 104 carriers who are actually writing policies, and only 17 of those write over 1% of the policies in Missouri. Since State Farm and American Family write 40% of the policies, I turned my focus to them.
In 2014, State Farm received $478,209,348 in premiums and paid out $261,613,988 in claims. Therefore, their loss ratio was 59.55%. Loss ratios are an indication as to the profitability of the company. For example, if the loss ratio was 100% this would indicate that the company was in poor financial condition. In 2014, American Family received $268,168,598 in premiums and paid out $136,330,552 in claims, for a loss ratio of 53.26%. How does this compare to the other carriers that write fewer policies? Liberty Mutual wrote 1% of the policies in Missouri in 2014. They received $18,173,129 in premiums and paid $8,999,363 in claims for a loss ratio of 45.20%. Thus, in 2014 with regard to homeowner claims, Liberty Mutual was more profitable than State Farm and American Family if you are looking strictly at profitability as a percentage. Obviously overall the latter companies made more money.
Why are loss ratios important? We all understand that insurance companies are in business to make a profit. They have to pay to keep the lights on and pay employees. I become concerned when those payments become incentive based such that claims handlers are rewarded for underpaying claims, or when claims are adjusted based upon the financial interest of the company rather than the best interest of the policyholder. I don’t know what the statistics are for homeowners who make claims, get denied and do nothing to assert their policy rights versus homeowners that hire us to pursue their claims and get the recovery they deserve. But I can look at some of the above statistics and infer that there are many policyholders out there that simply find the claims process to be too arduous and don’t have the energy to take on a big multi-million dollar company. This is what some insurance companies count on, how they make money, and how they stay in business. According to their website, State Farm was started in 1922, they insure more homes in the U.S. than any other carrier and they are ranked number 41 on the Fortune 500 list of the largest companies.2 Notably, this list ranks companies based upon total revenue.
It is easy to see why you may need assistance with your claim. Consult a professional and get the advice that will put your claim into the ‘paid’ column and not just the ‘premium received’ column.
“Good fences make good neighbors.”
1 Information available at www.insurance.mo.gov.
2 See www.statefarm.com/about-us/company-overview/company-profile/state-farm-story