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.


COLOR OF CHANGE is a just bad. I would respect these companies that pull out of ALEC due to beliefs or core values, but to be pressured by threats of an ultra liberal group that does not have OUR best interest in mind is disheartning as an American.

Pressured? I can't find anything wrong with shopping where I'm appreciated. That seems to be a "free market" kind of solution, doesn't it? I wouldn't patronize a hamburger store if I knew the managers robbed customers cars while they were inside buying hamburgers. Is that "ultraliberal?"

I've had State Farm for over 35 yrs, car and house. Until recently I was unaware of how deep this ALEC crap runs! I will forward this article to mt local agent and consider other insurancers. You, Tedoic, are are similar to a rattlesnake seeing his own tail and biting it!

Typical unintelligible, inarticulate, illiterate, brainless right-wing stupidity.

"Ultra left wing Obama lobbyist"?? Sounds like Tedoic has been brainwashed by the ULTRA RIGHT WING neo-fascist talk show mouthpieces who spread lies and misinformation. Tedoic doesn't seem to understand that all of us are under attack by the extreme right and we are all in danger of losing our rights and our constitutional protection if ALEC and other corporate right wing organizations get their way. Unfortunately, the right wing propaganda media machine is is clouding the minds of those who cannot or don't want to think for themselves or are too lazy to find out what the real story is. They are spreading FEAR, and the boogie man is true Democracy. It is interesting how some people have internalized a belief system that works against them and against their own best interests....

As usual, the right wing nuts can't spell as well as being unable to think for themselves.

For an article about funding, it only quoted 1 payment to them in 2010 to sponsor their annual conference, not an uncommon practice for companies who are participating in a conference. Beleive me, if there was any ongoing financial support this guy would have put it in the article. I don't call this "bankrolling"...the financial issue was the most minor part of this article but they love to draw you in with lies and exageration! He mentioned many policies that were sposored by ALEC that strongly influenced legislation affecting insurance...don't you want your insurance company there to be a voice for you? Of course he took each piece of legislation that benefitted the consumer by lowering costs and masterfully crafted it into a negative to fit the agenda of his article.

It's so nice of you to give this corporation the benefit of the doubt in assuming its role is limited to a one-time donation, merely because its recent sponsorship was cited as an example. But, State Farm has been aiding ALEC for well over a decade. For example, I am going to upload a screenshot of one of the brochures from the 1990s that lists State Farm as a major donor, alongside Koch Industries. And, State Farm's activities in ALEC help fund efforts that make it more difficult for you to sue if your loved one is killed by a dangerous product, more difficult for cities to pass laws to protect families from industrial hazards, and more difficult to pay for good schools for our children. State Farm already has plenty of "voice" in lawmaking but through ALEC it actually gets a "vote" as an equal to elected officials on model legislation to change your rights. The fact that you find nothing wrong with that makes me wonder if you have any notion that democracy is supposed to look like or if the lies you love from watching FOX satisfy all your needs. Lisa

you imagine that your interests and state farm's are the same? what rock have you been living under?