Congratulations to State Farm Insurance Company! Its profits rose almost sixty-four percent (64%) to $5.32 billion dollars last year from $3.24 billion dollars in 2005. In my opinion, during this time, I do not think that State Farm acted like very much of a good neighbor to victims of Hurricane Katrina or to other policy-holders who timely paid premiums thinking they would be protected in times of calamity. Unfortunately, it appears that when needed most, many insurance policy-holders were denied policy benefits last year. In the midst of its record-setting year, according to a recent story on CNN, State Farm apparently adopted a policy to minimize settlement offers for low-impact motor vehicle collisions forcing accident victims to take substantially low settlement offers or spent significant costs in litigation. Moreover, Katrina victims were forced to sue State Farm for refusing to pay property damage claims. By minimizing payouts to its policy-holders, these steps have maximized State Farm’s profitability to record levels.
In the midst of these record-setting profits, State Farm’s CEO’s salary increased at an even faster pace. The CEO’s overall salary increased by eighty-two percent (82%) from $6.4 million dollars in 2005 to $11.66 million dollars in 2006.
State Farm’s public relations teams continue to champion tort reform initiatives even during such record setting years of profitability. I believe that State Farm and other companies have every right to make a substantial profit and ordinarily I would applaud these efforts. I do not question State Farm’s right to earn $5.32 billion dollars nor do I believe that government should intervene to regulate the insurance industry any further. However, I am curious how State Farm or any other insurance company can earn such large profits on the one hand, and still claim losses based on the lack of tort reform initiatives throughout our country on the other. What do you think?