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.


Sure, we would all like our insurance companies to be there for us. The issue is that we elected congress to write legislation, not a shadowy organization that works behind the scenes to decimate the middle class, undermine the constitution, and profit off of the slave labor market they are creating.

I just dumped my homeowner's policy with State Farm, something I've been meaning to do since ditching my auto policy with them in the fall. I got a lower rate for homeowner's from a well-regarded insurer. I also wrote to the local State Farm agent stating why I was pulling out and asked him to forward my letter up the ladder. State Farm was my parents' insurer and I've held auto insurance with them for over 40 years. Good riddance!

I had State Farm for awhile years ago for my Auto Insurance, I found them to be 3 times as expensive as what I was paying,and Gieko is higher,so their commercials about better rates are a bunch of balona,if you want Geiko to pay a claim you will have to take them to court,is the feedback i have recieved from a few former Geiko policy holders,either way I switched,I have been with AAA for several years now,I dont know their political affiliation though, maybe I should research it.

you say three times as expensive. well i have shopped around all the big ones, Progressive., AAA, Gieko, Farmers etc. and to my surprise, no one comes close to State Farms Lower Pricing. so i think your claims are FALSE!

I would glaly pay more to get rid of acompany that supports ALEC which is a hate group. I am dropping my policies with State Farm ASAP and I have three. I equate such groups like ALEC to the KKK and the Taliban.ALEC is also supporting voter suppression.ALEC is a threat to this country like the red scare of the 50's and 60's.

I have been with State Farm 35 years, know the agent well, and just can't stomach their support for ALEC. Esp. now with climate change being a target of ALEC policy. Have to go elsewhere, but also saved $500 a year in the process.

I am dropping all three policies with State Farm when they come up for renewal. Maybe it's a drop in the bucket, but I felt like a million dollars when I left my big bank. I am looking forward to feeling similarly good when I dump State Farm and their Republican cronies.

I have been with State Farm for over 25 years. It pains me to dump my agent but I will not support any company that cannot see its way clear to disentangle itself from such a controversial and unneighborly organization as the American Legislative Exchange Council.

Is the company I work for, which really surprised me. CVS Caremark, which is a Pharmacy Innovation Company, having both retail stores and mail-service pharmacies as well as their Pharmacy Benefit Management side, which is completely insurance claims related, is otherwise a great company who does pay their full corporate tax rate in Fed & State taxes, and firmly believes in giving back to their communities, mostly with childrens health causes, and has installed more Boundless Playgrounds (for differently-abled kids to be able to play too) nationwide than any other company I have heard of. They give money to a lot of different local charities across the US through their corporate grants as well as encouraging their employees to volunteer in their local communities as much as they can. They are what I consider a very ethical corporation, BUT my liberal alarms went off when I saw they were part of ALEC. I have not yet determined what their role is within ALEC, but I want to know more. I wonder if their participation is similar to State Farm with research, or that it enables them to keep an eye on what the health insurance companies are doing / plotting thru ALEC... CVS Caremark has published research studies showing how access to affordable healthcare is vital for keeping Americans healthy and productive members of the workforce, instead of becoming disabled or so ill that they cost all of us more by needing more hospital stays and extensive healthcare that they can't afford either... Which ends up being paid by everyone thru higher costs, medicare & medicaid coverage, etc. This is fully in line with the Affordable Healthcare Act.