State Farm Insurance Claims "No Fault" in Bankrolling ALEC

Despite calls from Color of Change, the Center for Media and Democracy and other public interest groups to cut ties with the American Legislative Exchange Council (ALEC), State Farm Insurance, the nation's largest auto insurer and a major insurer of homes, has maintained both membership and leadership in the organization. Why would a Fortune #37 company that specializes in making a profit off of risk algorithms take the risk of alienating many of its own customers?

Screenshot of Brochure"(O)ur work with ALEC is limited to research projects for use by public officials considering matters that impact the affordability and accessibility of insurance," a State Farm vice president wrote to Wisconsin insurance holder Samuel Hokin in response to concerns raised about ALEC last year. "Even when we disagree, we engage," wrote corporate VP Louise Perrin.

In recent weeks, as the controversy over ALEC's agenda has increased, some have asked, "State Farm is Where?," taking a page from the ad campaign with the slogan, "State Farm is There." Citizens have also questioned whether State Farm is really "Like a Good Neighbor" when its funding for ALEC's operations has helped underwrite ALEC's support for the expansion of gun laws. Since 2005, ALEC has advanced as a model the law in Florida known as the "Castle Doctrine" or "Stand Your Ground," "Shoot First" or even "Kill at Will." That law had been cited as the basis for several weeks for not arresting George Zimmerman, who shot and killed his new neighbor, the unarmed Florida high school student Trayvon Martin. The Wisconsin policy holder had written State Farm that by supporting ALEC, it was supporting an "anti-democratic organization that is bent on destroying the way of life that State Farm members... hold dear."

ALEC Über Allies

What does State Farm get out of ALEC membership and what does ALEC get out of State Farm?

State Farm General Counsel Roland Spies serves on the ALEC Private Enterprise Board, which sits jointly with its Public Sector Board at ALEC's annual board meeting. Emory Wilkerson, another corporate counsel, served in 2011 on the ALEC task force where corporate lobbyists vote as equals with elected officials on "model" insurance-related bills. State Farm has also been a chairman-level sponsor of ALEC's annual conference, which typically means a hefty payment to the organization ($50,000 in 2010), beyond other pay to play donations by the corporation to ALEC for a seat on its "Commerce, Insurance and Economic Development Task Force," for example.

State Farm's participation on ALEC's insurance committee has put the insurer in a position to benefit from several major pieces of insurance industry model legislation. The most prominent of these, in the auto insurance industry, may be the Consumer Choice Motor Vehicle Insurance Act.

ALEC's "Choice" Legislation Ensures Silver Lining For Insurers

Among other things, the "Consumer Choice Motor Vehicle Insurance Act" lowers the minimum amount that insurance companies typically must insure motorists for under state law in auto accidents. Hyped as greater "choice" for consumers in the bill's title, the law can mean lower payouts for insurance companies, yielding higher profits. The lower minimum coverage can also mean that consumers who thought they had insurance for serious accidents do not have enough to cover the injured parties. In Wisconsin, for example, Governor Scott Walker signed legislation within weeks of taking office in 2011 that reduced the state's minimum coverage for auto liability insurance by half.

ALEC has also promoted a model bill for secondary car parts -- the After Market Crash Parts Act -- again leading to lower costs for insurers that pay to fix their insured's vehicles, and transfer the risk to policy holders that after-market replacement parts might be inferior to the manufacturer's part.

Other ALEC bills related to auto insurance would:

  • Create an industry-controlled registry of insured motorists for states to identify motorists who flout mandatory insurance laws (a model law which effectively creates the same kind of public-private partnership in mandated auto insurance that many ALEC members would oppose when it comes to health insurance);
  • Restrict or prohibit non-economic damages (such as pain and suffering) if an individual in a car accident did not have insurance* -- an industry effort to ratchet up the sale of policies; and, among others,
  • Prohibit state governments from being involved in the private insurance market (a theoretical proposition that may be a preemptive strike against policy makers who have considered taxing gas to cover uninsured motorists)

As of April 15, at least 10 consumer-oriented U.S. corporations have severed ties with ALEC, including several companies joining State Farm on the Fortune 500 list, such as Kraft, Coca Cola, and McDonald's.

*This article was modified on 4/19/2012 to clarify that the second bullet refers to uninsured persons.  The image showing State Farm as a major ALEC donor alonside Koch Industries and others from 1998 was added on 4/23/12.


I have all my policies with State Farm, and used the same agent all my life. She hasn't acknowledged my email about ALEC, which is disappointing. I've been researching other companies, and leaning toward Progressive. Anyone know of a resource to check out the track records of companies' political affiliations?

David, State Farm is not a for-profit shareholder company. It is a mutual insurance company whose revenues (not technically "profits") are distributed back to its policy-holders, rather than to shareholders. I'm curious though, if you are a State Farm policy holder, have you not received any of these dividends back?

I went to see my State Farm AGent who knew nothing about this secretive and shadowy they won't even tell their own agents. But I'm done with them .

Not only am I contacting my State Farm agent in Seattle, Brian Chambers that I will not renew, I will now post blogs everywhere identifying State Farm as a member & financial support of ALEC. You support extreme guns laws, you support voter suppression laws, you support anti-union legislation, & you support tax breaks for tobacco companies (smoking is disgusting & a major cause of health expense in this country) ... and I will not support you with my money!

They are better off without your business. You are an idiot and make no sense with your rambling. Find a tree to hug

So that is your argument? That's funny, but I have an advanced degree and it made sense to me. Oh but let me guess--that makes me an idiot, too, right? Wow, what an intellectual powerhouse you are. Go back to watching Duck Dynasty.

With no response from local office manager to my questions and, finding a good alternative with lower rates and which had left ALEC, I acted to switch my auto policy. My family before me and myself for decades had used State Farm. I will not give my business to elite interests secretly stacking the deck against public interest and smaller players in the market.

State Farm is also a non-profit mutual company. You cannot buy shares of State Farm anywhere. The only way you can own part of the company is to be a policy holder as policy holders own the company. If you want to make an impact on the direction of the company then vote when you get your proxy statement each year or organize a coalition of policy holders to vote en masse. If State Farm makes a profit, then that goes back to policy holders in the form of a dividend. There is NO profit motive for State Farm and the decisions that the leadership makes are in the macro level interests of all policyholders. If State Farm is pushing one legislative agenda over another, it is because they believe it best overall for policy holders and "best" means keepings premiums as low as possible while still keeping its promises to policy holders. I hope this provides some additional information for you.

A timely, but misdirected point. Listen to "Freakonomics" author Stephen Dubner on the business show Marketplace from April 18, 2012. It would seem to be a minimal move in the direction of (profitable at the macro level!) Corporate Social Responsibility for State Farm to avoid even the slightest association with "Stand Your Ground; Kill Your Neighbor" laws. It's not just good "macro" policy not to support such laws, it's good policy to oppose such laws. Policy holders certainly need not wait for an organized official action to demand that State Farm cut ties with ALEC. Here's that link:

I've had at least one State Farm policy since the 80s. I now have my house and two vehicles insured with them...I have never received a proxy or a dividend, although we have had only one minor accident. I called State Farm and received the "ho-hum-too bad" reply from the starts today!