Boom in Bloomington

In most respects, Bloomington, Ill. (pop. 36,800), is a typical bustling Midwestern market city. The one thing that makes Bloomington a bit different from the run-of-the-mill county seat is the presence of its largest employer, the State Farm Mutual Automobile Insurance Co. This week State Farm will report that its premium income for the first half of this year was up nearly 11% to $281 million, and that in May the company signed up its seven millionth policyholder. All this handily helped State Farm hold its rank as the world's largest automobile insurance company.

Despite its big-time business. State Farm glories in the corn-and-cows atmosphere into which it was born in 1922. Though it operates in 50 states and Canada, the company has never considered moving its headquarters out of Bloomington, and all but one of its twelve directors still live in surrounding McLean County. State Farm executives have strong family ties: Board Chairman Adlai H. Rust, 70, and President Edward B. Rust, 43, are father and son, and Vice President Herbert L. Mecherle is the son of Founder George Jacob Mecherle. After World War II, when State Farm decided to decentralize its sales and claim work among 18 regional offices, it spotted most of its new branches in small cities and towns, too. Explains Ed Rust, a neighborly sort: "These are the kind of places where I would want to raise my kids."

"Do You Skate?" Small-town living is one of the traditions inherited from Founder Mecherle, who until his death in 1951 was known in Bloomington as "The Chief." A farmer whose family settled in McLean County in 1857, Mecherle started selling auto insurance to neighbors shortly after World War I, soon discovered that the companies whose policies he peddled either ignored farmers or charged them the same rates as city drivers, whose accident rate is higher. When Mecherle suggested changes, he was told: "If you don't like the way we do things, go start your own company." So he did.

State Farm's early offices were in a back room of the county farm bureau building. As business increased, the company put up its own office building, but soon overflowed that into a funeral parlor, a ballroom and a warehouse. At one point, operations were so scattered that Mecherle hired the members of a roller derby that had gone broke in Bloomington and set them to delivering interoffice mail on roller skates. For years afterward, State Farm personnel applications included the question: "Do you roller-skate, and how well?"

30% Off. Mecherle had a revolutionary approach to insurance. By choosing customers among farmers and good-risk professions and charging "membership fees" to cover initial policy costs, he was able to scale as much as 30% off conventional auto insurance premiums. He insisted that his agents work only for State Farm, but in return, the company took over all their paperwork and payments collections: the arrangement left the agents free to sell, and has cut State Farm's expenses-to-earned-premiums ratio to 19.1%, second best in the industry after Liberty Mutual's 17.4%.

Today, as a result, State Farm insures one U.S. private passenger car in eight, has created subsidiary life, fire and accident companies that last year added $87 million in premium income. The $5,000,000 annual rental that State Farm pays for the computers to handle its paperwork makes it one of IBM's biggest customers.

The Other Seven. Though this summer marks its 40th anniversary, State Farm is all but ignoring the fact, instead has its eye firmly fixed on harvests to come. The race to write automobile insurance is more and more a battle between two giants, State Farm and Sears, Roebuck's Allstate. Allstate narrowed the gap in the late 1950s, but State Farm has pulled ahead again recently, last year collected $43 million more in premiums than Allstate. For 1970, State Farm has set a goal of 11 million policyholders. and to achieve it intends to increase its agent force from 8,000 to 11,000. Says President Ed Rust with a smile: "We want those seven out of eight passenger cars we still don't insure."

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