State Farm on Thursday announced a historic $5 billion dividend for auto insurance members. This is the largest amount in the mutual insurance company’s 103-year history.
“State Farm Mutual’s financial strength and better-than-expected underwriting performance reported across the industry made this dividend possible,” the company said in a statement.
On average, customers can expect to receive a $100 refund, but State Farm says the refund amount varies by state and amount of premium paid.
State Farm also reported lowering premiums by approximately 10% in 40 states, resulting in total savings for customers of $4.6 billion.
This is a trend across the auto insurance industry. Car repair costs are starting to fall, and the frequency of accidents will decrease by 2025.
However, car insurance premiums are rising. According to the U.S. Bureau of Labor Statistics, by early 2025, premium rates would have increased by more than 50% in three years, making auto insurance inflation the highest in 50 years.
Affordability has become a major concern for many customers, leading them to shop around for a better deal.
TransUnion recently released a report showing that shopping for insurance has become a routine activity for consumers, rather than an unusual event triggered by the purchase of a new car or home.
“Right now, it’s safe to say that buying term insurance is really the new normal,” Patrick Foy, senior director of strategic planning for TransUnion’s insurance business, said in an interview with CNBC.
The report noted that the main factor behind interest rate shopping is economic pressure encouraging consumers to look for ways to reduce household spending. At the same time, insurance companies are investing heavily in marketing and setting competitive rates.
traveler, Berkshire Hathaway Mr. Geiko root and Chub It competes with State Farm, USAA and other mutuals whose customers are also shareholders.
progressive State Farm’s dominance in the auto sector is under particular pressure, with one major auto insurer announcing significant returns to customers in 2025. The company paid $1 billion in dividends to customers in Florida, where state law requires insurance companies to return excess profits.
USAA announced it will pay $3.8 billion to members across all states in 2025.
Auto insurance operations account for 63% of State Farm’s property and casualty insurance business. Customer loyalty in auto insurance often translates into loyalty in homeowners insurance, and State Farm told CNBC that claims costs show no signs of slowing down and it continues to work to charge appropriate rates to cover them.
