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.


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." I had State Farm for many years and feel good that I no longer am extorted via their for Profit funded non-sense....

Go ahead and boycott State Farm. Who cares? They don’t. Have you looked at the list of members? Almost every major insurance company is a member of this organization. GEICO, Liberty Mutual, Nationwide, Travelers, etc., etc... Where you going to go to? Have you seen the other members? GE, GM, ATT, Verizon, Texaco, J&J, P&G....? You'd have to live in a shack like Ted Kaczynski to live your life one day without supporting one of the organizations that participate in this. But I bet you will still talk on your cell phone and drive your car and clean your house and eat food from the supermarket. What a bunch of hypocrites. It’s all politics and you’re an idiot if you think otherwise.

Attitudes such as yours are why nothing gets done concerning organizations such as this. ALL things can be accomplished and even huge corporations can be taken down by the boycott system. Yes, there are many Fortune 500 corporations listed as members of ALEC. But taken on one-by-one by the membership of all the unions, they could very likely face ruin. Boycott is a huge motivator. Especially in a tough economy. I would like to ask a question? Do you get upset about the economy and our leadership and then choose not to vote?

“State Farm IS There”, at ALEC Board Meetings; INSURING that they make even more profit and that customers don't have a voice and don't get what they think they're getting. With "neighbors" like that, who needs foreign enemies?!

I am so glad I didn't switch insurance from Auto Owners last month. I might have saved a few dollars but I'd rather deal with a company that has some ethics.

I am canelling all my SF insurance, home, car, umbrella. Urging kids and other family members to do the same.

I have started a petition calling on State Farm to pull out of ALEC. It can be found here: It is correct that State Farm is not a for-profit, investor-owned company. State Farm is a mutual benefit corporation, a kind of financial cooperative, and is owned by its policyholders. In other words, State Farm effectively pools money from its policyholder-owners in order to provide them with insurance services. Any excess revenue not used for that purpose, or used to add to the company's reserves, is -- or should be -- returned to its policyholders. Most years the policyholders receive a rebate in the form of a reduction in their premiums. It is a great model, but State Farm is abusing the relationship with its membership in ALEC. So, basically, State Farm is taking money that rightfully belongs to its policyholder-owners and using it to support a ideological agenda. It would be just as wrong for State Farm to belong to an avowedly left-wing group (although personally I probably wouldn't object!). Its claim that it is merely working to promote legislation that benefits its "customers" (and we are not "customers") is belied by the fact that it has won awards from ALEC as "Best Private-Sector Company" and donated large amounts of money. Please sign the petition!

We want to sign the petition. We currently have State Farm for our insurance and will probably stop using them if they don't dropo out ot ALEC.


I've been sitting on my hands thinking that State Farm would surely join ranks with other major corporations in cutting ties to ALEC. I just got off my hands and wrote an e-mail to my local State Farm agent. I told him how much I have appreciated doing business with his office, but that I cannot continue with State Farm if they don't cuts ties with ALEC. I don't know what good it will do, but it couldn't hurt!