The Farmer from Merna

Schriftgiesser wrote an authorised company history of State Farm Mutual Automobile Insurance and of its founder George J. Mecherle, a farmer from Merna, Illinois, who started the company in 1922.

The founding insight was actuarial and distributional. Mecherle argued that farmers drove less, drove on less crowded roads and had fewer accidents than city drivers, and that charging them the same rates as urban drivers was both unfair and a commercial opportunity. He organised State Farm as a mutual, owned by its policyholders, which removed the need to pay returns to outside shareholders and allowed lower premiums. He also changed the payment structure, charging a membership fee plus a semi-annual premium rather than the industry's annual payment, which reduced the amount a farmer had to find at one time.

Distribution was the other element. State Farm built through farm bureau connections and then through exclusive agents who sold only State Farm products, which gave the company a captive sales force with local relationships rather than independent brokers who would sell whatever paid best.

The reference has not verified the specific figures and episodes in this authorised 1955 history, which was written with company cooperation and is not widely available. Its interest is as an account of how a mutual insurer built a national position through a segmentation insight, a lower-cost ownership structure and a controlled distribution network, which are the same elements that later insurance disruptors have used.