Esurance vs. State Farm Auto Insurance
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UPDATED: Apr 25, 2022
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State Farm is one of the oldest and most respected names in the auto insurance industry. Founded in 1922, State Farm began as a mutual insurance company owned by its policyholders. Its initial goal was to provide affordable car insurance to farmers in the Midwest.
State Farm is comprised of two dozen affiliate companies, including the State Farm Bank, which operate throughout the U.S. and Canada.
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By comparison, Esurance is a young, upstart, direct insurance company founded in 1999. Direct insurance implies that Esurance does business almost entirely online.
Unlike State Farm and other office- and agent-based insurance concerns, Esurance promotes its products and services directly to consumers via the World Wide Web.
Currently, Esurance controls about 2% of the online auto insurance trade. This number is small indeed when compared to the online sales leader Geico.
At present, Geico enjoys a 38% share of the U.S. direct car insurance market with more than 10 million policyholders.
To reach the 2% mark, Esurance had been growing by about 20% per year over the last five years.
Esurance now boasts more than a half-million policyholders, representing more than $836 million in auto premiums written each year.
State Farm, on the other hand, writes one out of every five auto policies in the United States and controls 18.6% of the entire auto insurance market. However, State Farm earns its money the old-fashioned way, through its network of more than 18,000 licensed agents, based in all 50 U.S. states and the District of Columbia.
In all, State Farm employs more than 68,000 dedicated insurance professionals.
Esurance Joins the Allstate Insurance Group
Looking at the above-referenced statistics, it’s difficult to imagine that Esurance is a serious competitor of the giant State Farm organization. However, in the spring of 2011, Allstate Insurance announced its intention to purchase Esurance for $1 billion dollars.
The transaction concluded in October of the same year and has effectively doubled Allstate’s direct auto insurance market share, which is now 4%.
According to 2012 rankings by the Insurance Information Institute, Allstate is the second-largest provider of private passenger car insurance policies in the country, with a 10.3% share of the market. In 2011, Allstate wrote $17.5 billion in auto premiums.
However, Allstate’s market share has gradually been slipping and its number two position has been seriously challenged by current number three, Berkshire Hathaway (Geico) at 9.1%, and by Progressive Insurance, which has a 7.9% share of the auto insurance market.
According to International Insurance News, Allstate had been looking to expand its business base and add more direct insurance customers through the Internet. The 2011 merger gives Allstate and Esurance something that both companies very much needed and puts both companies in a much stronger market position.
Esurance was among the first auto insurers to begin selling policies online.
A dozen years later, Esurance found itself in the red, spending more on policyholder claims and operating expenses than it was taking in with premiums.
With the acquisition, Allstate gets exclusive Internet technology and other Esurance resources that are targeted to assist online shoppers. Esurance, in turn, gets the experience and guidance of the nation’s second-largest insurance provider to limit costs and help turn Esurance into a profitable company once more.
Before the merger with Allstate, Esurance was providing car insurance to drivers in 32 U.S. states. In recent years, Esurance began to branch out into other types of insurances including motorcycle, homeowner’s, life, health, and renter’s insurance.
Comparison Shopping Online
While State Farm remains the biggest player in the car insurance industry, its many competitors like Esurance have learned how to satisfy customers online, eliminating the need for costly brick and mortar offices, as well as the agents to staff them.
According to J.D. Power and Associates, who recently released their first-ever car insurance website evaluation study, more and more consumers are searching online for a new auto policy.
In fact, more than a third of car insurance shoppers–34% according to Power–prefer to buy their policies online rather than through a call center or local agent!
In the last three years, the percentage of Internet shoppers who are able to complete their car insurance transactions online has increased by more than 50%. The study also concluded that almost three-quarters of insurance shoppers visit at least one insurance company website before they purchase their policy.
As the demand increases for online services, companies like Esurance have a distinct advantage. In the J.D. Power survey, websites for both Esurance and Allstate scored well with consumers, along with Geico and the Travelers. State Farm, however, was among the also-rans.
Websites in the J.D. Power study were judged on their clarity, range of services, speed, ease of navigation, and overall appearance. These five factors all contribute to consumers’ general satisfaction with an insurer’s website.
Another international consulting and market research firm, the Customer Respect Group, also found the Esurance website to be top notch. They voted esurance.com “Best in Class” for its overall customer support efforts. Esurance prevailed over 20 other leading car insurers, including State Farm, Geico, Progressive, and Nationwide.
Websites were rated on claims handling, coverage, online payments, policy updates, and quotes.
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“Like a good neighbor,” State Farm Insurance has been there for its policyholders for more than 90 years. State Farm is also one of the largest companies of any kind in the nation, ranking 43rd on the prestigious Fortune 500 list of companies.
Losing significant revenues in this, its 13th year, Esurance might not have survived if not for Allstate’s willingness to buy the fledgling company.
State Farm has weathered many storms in its storied past, some of the worst occurring during this past year, but its financial outlook remains strong. In 2012, State Farm was given A.M. Best’s Superior A++ rating for financial strength.
As Esurance is now backed by Allstate, it has inherited Allstate’s superior A+ rating. Allstate is also ranked highly on the Fortune 500 list of companies, placing 93rd on the 2012 list.
Enhanced Customer Service
Forbes Magazine recently published its list of the top two dozen car insurance companies. This time, insurers were ranked for customer satisfaction as determined once again by J.D. Power and Associates.
At the top of the list for 2012, and the overall Power Circle winner, was The Hartford, earning high marks for its products, pricing, and call center representatives.
In seventh place was State Farm with a respectable above-average overall score, and high marks for its policy offerings and local agents.
Near the bottom of the list were Esurance, at 18th, and Allstate Insurance, in 20th. While both companies were rated well in the website category, both were found deficient in other areas. Allstate was found to be less competitive in pricing. Allstate was also rated low for its call center representatives.
Esurance received a full five circle rating for its website, but has no local agents.
As a newer 21st Century company, Esurance prides itself on supporting its customers as well as the environment with many green initiatives. The Esurance paperless customer experience helps save thousands of trees each year.
In addition, all Esurance company vehicles are hybrids!
Esurance also believes in educating its customers. The Esurance website provides many informative articles relating to car insurance. They also provide consumers with a glossary of commonly used insurance terms to help demystify the process of insurance shopping.
While they may not have any local agents, the Esurance web experience includes their trademark Coverage Counselor service. Customers also have access to customer service operators 24 hours a day, seven days a weeks, to answer questions and provide assistance with policy needs.
For consumers who are concerned with transacting business online and providing personal financial information, Esurance promises to safeguard customers’ security and privacy. Esurance is a member of the online Better Business Bureau and adheres to a strict business practice code.
Esurance is also a member of the VeriSign secure site program to further help protect customers’ sensitive data.
State Farm in the News
All of this emphasis on Internet shopping is not lost on State Farm. In response to growing customer demands, State Farm has introduced its own version of a pay-as-you-go insurance program, designed to save its customers hundreds of dollars each year in reduced auto insurance premiums.
State Farm’s innovative Drive Safe and Save program utilizes the services of existing onboard monitoring technology from companies like OnStar. With this program in full swing, State Farm estimates that its customers can save as much as 50% on their car insurance premiums.
Drive Safe and Save participants subscribe to a service such as OnStar, which automatically sends reports back to State Farm headquarters on how many miles are driven and other driving habits. These include the hours you may be on the road, as well as how hard and how often you may hit your brakes when driving.
State Farm now offers its Drive Safe and Save program in 11 states and hopes to add many more states in the near future.
Whether you as a consumer have a preference for online shopping or you would rather visit a local office and agent, you have many more insurance choices than ever before. It certainly pays to explore all of your car insurance options before settling on one carrier.
Both State Farm and Esurance offer high quality products at a reasonable price with a variety of service options. Which company you choose is up to you!
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