Insurance

State Farm auto loss expenses fell $4.4 billion in 2021

State Farm announced Friday its auto claim spending and loss adjustment expenses fell 13.75 % during the pandemic year of 2021.

The nation’s No. 1 auto insurer paid $27.6 billion in claims and LAE last year, down from $32 billion in 2021. However, it collected nearly exactly the same amount of auto premiums — $41.3 billion instead of $41.5 billion. It also spent nearly exactly the same amount on other underwriting expenses as in 2021.

The company’s auto business arrived on the scene ahead $3.5 billion before dividends.

The $200 million earned premium decline came despite a rise in share of the market. State Farm attributed this to its “focus on returning value to customers in the form of overall lower premiums.”

Body shops and insurers saw far fewer claims in 2021 as the national COVID-19 response cut U.S. miles driven and the opportunity to get in wrecks. CCC estimated that repairable vehicle claims fell 21.3 percent in 2021.

State Farm said it cut premiums an average of 11 percent, which it said represented a $2.2 billion savings over 6 months. It paid $1.9 billion in dividends to the auto customers.

“We strive to help more and more people in more ways. Within an unprecedented year like 2021, we focus on our core mission to help people manage the risks every day life, get over the unexpected, and realize their dreams,” said Senior V . p ., Treasurer and Chief Financial Officer Jon Farney. “The Good Neighbor Relief Program is really a testament in our commitment to our policyholders and communities. Whether premium relief, dividends to convey Farm Mutual auto customers, payment flexibility or philanthropic efforts within the communities we live and work, we’re focused on relief and recovery efforts.”

State Farm’s car insurance line still had a pretty great year even after the dividends and premium cuts. A $3.5 billion underwriting gain minus $1.9 billion in dividends still seems to represent a $1.6 billion net win for the insurer.

Even throughout the nonpandemic year of 2021, State Farm collected $9.5 billion more in auto premiums than it paid in claims and LAE. The company’s $10.3 billion in other underwriting expenses arguably pushed it to a $764 billion loss that year.