State Farm's Reported Agent Comp Changes and the Read Across for Auto Insurers

Research evidence excerpt

State Farm's Reported Agent Comp Changes and the Read Across for Auto Insurers

Financials | Global Insurance - P&C

June 29, 2026

David Motemaden, CFA State Farm's Reported Agent Comp

212-497-0832

David.Motemaden@evercoreisi.com Changes and the Read Across for Auto

Thomas Gallagher, CFA Insurers

212-446-9439 Over the last month there have been various reports of State Farm

Thomas.Gallagher@EvercoreISI.com

reducing agent commission rates (effective ’28) and cutting benefits for

Peter Knudsen

its ~19,000 agent force (we estimate the total sales force is closer to 212-708-8497

Peter.Knudsen@evercoreisi.com 60k). We suspect the move is to get even more competitive on pricing

Nicolas Lu for auto and homeowners insurance, although it has already reduced

212-497-0812 auto insurance prices by -4% in 2025 and -3.7% so far in ’26. The timing

Nicolas.Lu@evercoreisi.com of the commission changes surprises us as State Farm achieved a 20%

expense ratio over the last 2 years, well below the 24% long term

average level (Fig1). In addition to being more price competitive, we

think State Farm could be reallocating its expense base towards

advertising vs the 1-2% of premiums it has spent on advertising over

the long term (Fig2).

Bottom Line: The headline of State Farm cutting commissions in ’28 is

a negative as it will very likely reinvest the savings into getting more

price competitive. However, we estimate a 30% commission cut would

translate into a -5% reduction in auto prices, similar to the -4% reduction

in ’25 that didn’t result in growth acceleration (in contrast, growth

decelerated to +700k PIF & accounts from +1m in ’24). Also, auto price

cuts at State Farm didn’t result in others following suit in the ’18-20 soft

market or the current one.