SWOT Analysis

Organizational History
Farmers Insurance was started in 1927 by John Tyler and Thomas Leavey in Los Angeles California as Farmers Automobile Inter-Insurance Exchange. According to “The Farmers Story” in March of 1928 Tyler and Leavey wrote their first auto insurance policy to Charles Brisco on his 1925 Cadillac Phaeton. When Mr. Brisco was asked years later why he had chosen a new and untested company, he stated “I just exercised sound judgment”. Tyler and Leavey saw an opportunity to serve the farming, ranching, and rural communities in California. Tyler and Leavey expanded markets of insurance throughout the decades. In 1930’s they expanded their business model to include the trucking industry. In the 1940’s Farmers Fire Exchange was added adding Home Insurance. In 1950’s they purchased New World life. Acquisitions and expansions continued throughout the decades. In 1988 Farmers was purchased by British American Tobacco Industry and Zurich Financial Services Group was created. As Farmers declares in 2007 Farmers purchased Bristol West and in 2009 purchase 21st Century Insurance and Financial Services.
According to AM Best Farmers is the third largest personal lines insurer in the United States.

Mission Statement
Farmers has a Vision Statement
Farmers will drive innovation and operational excellence to provide the best value and experience for every customer we are privileged to serve.

Organizational Strengths
The first organizational strength is Farmers Brand. Farmers Insurance is a well recognized national company providing insurance in 41 states of the United States. Farmers is an established insurance company serving its customers for over 8 decades. The Farmers Brand extends to multiple lines of insurance from personal lines, commercial, to financial solutions. The recognition of the Farmers Brand is verified through AM Best ratings. Farmers Insurance Companies is rated as the third largest personal lines company in the United States according to AM Best. This is a distinct competency as this would allow Farmers to take advantage of its brand recognition and expand operations throughout the United States.

The second organizational strength is Farmers Mobile Catastrophe Fleet. The Mobile Catastrophe Fleet helps to reinforce the visions statement of Farmers to “drive innovation and operational excellence to provide the best value and experience for every customer we are privileged to serve”. Insurance News Net reported in August 23rd article Paul Quin Assistant Vice President of Claims Communication explains that “The Mobile Catastrophe Fleet are equipped with various advanced technology, such as built-in GPS navigation, security/ safety system, noise-reduction generators, and in-motion satellite TV which allows Command Center personnel to track inclement weather and urgent news reports when all other forms of communication are unavailable. They can be dispatched in a moment’s notice to any catastrophe in the contiguous United States.” This is a distinct competency to Farmers Insurance as there are less than a handful of companies that have the resources or capabilities to provide such service. Customers can be directed via media to go to Farmers stationed Catastrophe Center. Farmers CAT teams will be able to provide immediate service to its policy holders.
Organizational Weaknesses
The first organizational weakness is Farmers Agency Force. Tom Schrader, President of United Farmers Agents Association, explains “Right now agents are feeling very threatened because their insurance products are uncompetitive and have been for years. Many agents are struggling to hold onto their existing clients and are watching their folios erode.” Furthermore Tom explains “The most common remark made by the member and nonmember agent today is: "I can't write any new business; my existing customers are leaving and what is FGI doing to help? They are buying companies that compete directly against me like 21st Century.” This is a weakness as a negative culture is developing. Struggling agents may not be able to hold on, disgruntled agents may leave. With the loss of agents Farmers would have to revise strategy to focus on retention of agents, or strategy to develop new Agencies. This is also a weakness as talent pool may drain as they pursue other opportunities. To minimize weakness Farmers may consider opening up lines of business of recent acquisitions to Farmers Agency Owners to market. This will allow the Agency Owner the ability to sell an additional product and increase production.
The second weakness is the Farmers Agency Force are not employees of Farmers. The Agency Force are made of Independent contractors. This is a weakness in several areas. First, Farmers is unable to control locations of operations for Agency work Force. Agency workforce have free will to choose location sites. Many problems can occur with such practices. Over saturation of product in given location provides greater exposure to risk. Next, Farmers is not able to control how the business will operate. An Agency Owner is free to choose own hours of operations. This is a risk to the Farmers Brand as standard operating procedures may differ from agency to agency. This risk can be eliminated by making all Agency Owners employees of Farmers.
Organizational Opportunities
The first organizational opportunity is growth and expansion. The current economic environment with high unemployment gives Farmers Insurance the ability to increase its talent pool. With the availability of skilled workers Farmers could strategize how to increase presence in remainder of states that it is not currently operating in. As of now Farmers only operates in 41 U.S states and primarily focuses its operations west of the Mississippi River. By taking advantage of current economic environment to strengthen talent pool will give Farmers the ability to provide necessary man power for expansion. Incorporation with recent acquisitions Farmers will have the ability to extend its presence east of the Mississippi. This will affect Farmers in several ways. With focus on expansion east of the Mississippi Farmers will retain current market position and threaten competitors. Farmers Insurance will be able to extend its brand.
The second organizational opportunity is Social Cultural Dimension. U.S. census report “table 53 languages spoken at home by language: 2008” reports that 34,560,000 households spoke Spanish as primary language at home. Immigration from Latin American countries has lead to Spanish being spoken as the primary language in homes in the U.S... Spanish speaking households are not limited to the southwestern states. The census also states that the Latino population is the fastest growing minority population in the U.S. This is an opportunity for Farmers to develop an agency force and support service for customers that prefer to conduct business in Spanish. By not restricting development of agency force and support services to southwestern states Farmers can take the lead in developing multicultural and diverse work force across the country. This will further strengthen Farmers Culture and relations with its customer base by providing a service and Farmers will benefit with increased retention ratios.

Organizational Threats

The first organizational threat is Progressive Insurance Company. Progressive has maintained a strong market share of auto insurance throughout all states in the U.S. Progressive insurance ranks number 4 in Texas with a 7.5% market share and number 9 in California with a 4.1% market share as it reports on it statistical site. In the general task environment Progressive is a direct threat to Farmers Insurance company as Progressive is the number 4 auto writer in the nation. Progressive is a threat as it has strong brand recognition, a large client base, and a superior marketing system. Progressive has the ability to open additional lines of business to market to its current book of business. If Progressive decides to purchase or create a Fire Company to sell Home Insurance to its current book of business this would directly challenge Farmers and it position as the number 3 personal lines writer in the country. Farmers’ Insurance market share nationwide would decrease with launch of Fire program from Progressive directly affecting Farmers bottom line.

The second threat would be regulators. In the general task environment regulators of insurance such as State Insurance Departments can deny rate revisions by an insurance company if they deem them to be excessive. This is a threat to Farmers as increases are needed to justify increased property losses and increased cost of reinsurance. If the state regulators are able to reject rate revisions this could cause Farmers to operate at a loss in the State. In “Farmers Insurance, state agree to cut ‘excessive’ rate hike” by Terrance Stutz posted January 12, 2010, Stutz reports “State Insurance Commissioner Mike Geeslin, who called the initial rate plan "excessive and unfairly discriminatory," signed a consent order Monday agreeing to a 4.5 percent increase for the 300,000 customers of Farmers' largest home insurance subsidiary.” Farmers had requested a 10% rate revision to offset prior losses, future anticipated losses, and the increase cost of reinsurance.

Summary

Farmers Insurance has the ability and the resources to capitalize on the economic environment by taking advantage of unemployment opportunities of the country and to develop a multicultural and diverse work force throughout the country. Having a multicultural and diverse workforce will enable Farmers to develop target marketing strategies. With new target marketing strategies Farmers will have the ability to reach a wider client base as it expands east of the Mississippi.

In order for Farmers to neutralize it threats Farmers must not be complacent. Farmers must continue to look for opportunities to grow and expand to protect its market share. Farmers must continue to be active with State Governments and local officials with its communications. Farmers can also neutralize threats and public perception by continuing to be an active member in the communities it serves.

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References

The Farmers Story http://www.farmers.com/farmers_story.html A.M. Best Affirms Ratings of Farmers Insurance Group, Its Members and Farmers Group Inc. http://www3.ambest.com/Frames/Frameserver.asp?site=press&Tab=1&altsrc=2&RefNum=65494653775146536656 insurancenews.net http://insurancenewsnet.com/article.aspx?id=219959&type=newswires US Census Bureau http://www.census.gov/compendia/statab/2011/tables/11s0053.pdf http://www.census.gov/population/www/pop-profile/natproj.html
Farmers Insurance, state agree to cut 'excessive' rate hike by TERRENCE STUTZ / The Dallas Morning News

http://www.wfaa.com/news/consumer/Farmers-Insurance-state-agree-to-cut-excessive-rate-hike-81217882.html