State Farm Mutual Automobile Insurance Co., the largest U.S. home and auto insurer, plans to shut down 11 U.S. facilities, including its operations centers in Indianapolis and West Lafayette, displacing about 4,200 workers, after a $7 billion annual underwriting loss last year on auto policies.
The Bloomington, Illinois-based company announced the decision Thursday, calling it a consolidation. The decision will affect about 620 employees in Indiana—about 310 in Indianapolis and approximately 310 in West Lafayette, the company said.
The Indianapolis and West Lafayette operations centers are slated for closure in 2020. The company operates the local operations center in an 88,000-square-foot office space at 9200 Keystone Crossing.
The work at the 11 facilities will move to the headquarters in Illinois and to other offices in cities including Atlanta, Dallas and Phoenix. The company said employees in affected facilities will have opportunities at other State Farm locations.
The insurer will exit Parsippany, New Jersey, and Petaluma, California, in 2018. Locations targeted for closure in 2019 are Kalamazoo, Michigan; Irvine, California; and Tulsa, Oklahoma.
Facilities closing in 2020 are in Medley, Florida; Indianapolis; Downers Grove, Illinois; and West Lafayette. Closing in 2021 are offices in Bakersfield, California; and Frederick, Maryland.
Justin Tomczak, a spokesman for State Farm, said the company is exiting leased facilities.
State Farm, Allstate Corp., Hartford Financial Services Group Inc. and Warren Buffett’s Berkshire Hathaway Inc. are among companies that have been burned in recent years by higher claims expenses from car crashes as more drivers are distracted by electronic devices. Higher repair costs have also hurt in an era when drivers are logging more miles behind the wheel. Companies have been charging more for coverage and looking for ways to reduce costs.
“The company’s decision to exit these facilities was based on efforts to best serve customers by gaining efficiency through streamlining and improving processes, leveraging technology, and concentrating employees in larger locations,” State Farm said in a written statement.
CEO Michael Tipsord is working to improve results at the insurer after being named in 2015 to replace Ed Rust, who led the policyholder-owned company for three decades. Profit dropped to $400 million last year from $6.2 billion in 2015, hurt by the auto insurance results.
The company posted better returns on businesses including residential coverage, banking and mutual funds. State Farm has almost 70,000 employees.
There are more than 500 employees in the Kalamazoo, Tulsa, Bakersfield and Frederick facilities, Tomczak said. The first two offices to shut, Parsippany and Petaluma, have fewer than 60.
State Farm in 2013 struck a deal to sell many of its offices to Lone Star Funds and then lease back the property. The insurer said at the time that the transactions would provide cash and give the company more flexibility.
“We have already seen many benefits to housing large groups of employees together in the hubs,” Tomczak said by email.