This article first appeared on April 14 in PropertyCasualty360.

In the 1920s, a plague of careless city drivers sent insurance rates soaring for small-town and rural car owners. That imbalance created opportunity, and a few sharp-eyed insurance entrepreneurs created State Farm, Nationwide and USAA to capitalize on it.

As we enter the 2020s, insurers face a broader and more daunting array of challenges than their predecessors did a century ago, from climate change to shifting customer preferences to technological disruption.

A glimpse in the rearview mirror can show today’s leaders a clearer view of the road ahead. Understanding how the insight and enterprise of the 1920s insurance industry can be applied to today’s social-media-driven millennials is a good place to start.

The birth of rural auto coverage — and three industry titans

State Farm

Pictured: the logo for StateFarm.

Despite the dearth of paved roads and traffic in the early 1920s, Illinois farmers like George Mecherle were charged as much to insure their cars (a Ford Model T, in Mecherle’s case) as were the dandies careening around urban Chicago. A hard-working farmer whose word was his bond, Mecherle decided to do something about such blatant price gouging, according to Karl Schriftgiesser in “The Farmer from Merna.”

After trying his hand at selling car insurance for a local company in Bloomington, Mecherle became convinced there would be strong demand for policies offered to farmers by an honest insurance company at a fair price. He vowed to build one.

He saw a model in the success of member-owned farm bureau organizations across the Midwest. Working closely with a small group of like-minded insurance pioneers in Bloomington, Mecherle launched the State Farm Mutual Automobile Insurance Company on June 8, 1922.


Pictured: the logo for Nationwide.

Seeking to expand their domain a few years later, State Farm leaders met with cooperatives in other states, including the Ohio Farm Bureau. But leaders in that state preferred an Ohio-owned insurer.

The book “On Your Side: The Next Chapter” tells the story of how the Farm Bureau Mutual Automobile Insurance Company, launched in 1926, expanded steadily into towns and cities during the Great Depression, adding fire coverage in late 1933.

The insurer also expanded across state lines. By 1940, it was operating in nine states and the District of Columbia. Based on regulatory concerns, the insurer split off from the Farm Bureau in 1949.

In June 1954, perceiving demand for a product that would weather inflation, the company’s executives made Farm Bureau Mutual the first company to link insurance and equity mutual funds in a retirement package — the first step toward becoming a full-fledged financial services firm. Insurance industry stalwarts were aghast. A year later, the company changed its name to Nationwide Insurance.


Pictured: a screenshot of USAA's website. A magnifying glass is highlighting the USAA logo.

The same year that George Mecherle decided there had to be a better way to insure his Model T, a group of Army officers in San Antonio reached a similar conclusion. Like farmers across the country, they were being charged what they considered usurious urban rates for insurance. Frequent transfers between military bases across state lines made it even more difficult to find accident and liability coverage from the state-regulated industry.

So in 1922, the officers formed their own insurer, which they named USAA, as an inter-insurance exchange, meaning they effectively insured each other. Putting solvency and growth prospects above military branch rivalry, the following year, they offered USAA membership to Navy and Marine officers.

USAA membership expanded in good times and bad. In the depths of the Great Depression in 1931, USAA doubled its membership to 30,000. In 1934, membership opened to foreign service and State Department officers.

Home insurance and an expanding array of financial services would be added over the decades, and in 1996, after years of discussion, the insurer took one of the most momentous steps in its history: It expanded membership to include enlisted personnel.

What history teaches us

State Farm, Nationwide and USAA were born within a few years of each other during a period of great social and economic change. They each achieved abiding success by creating innovative new models and opening avenues of growth that legacy insurers had failed to discover.

Mecherle took inspiration from an adjacent industry to create an offering that not only presented his target market with a fairer price but also came wrapped in a familiar, comfortable business model. Essentially, he created a new customer experience for a demographic that hadn’t been well served by the industry’s existing infrastructure.

Leaders at Farm Bureau Mutual in Ohio chose to serve their customers’ needs instead of listening to the risk-averse voices in an already risk-averse industry. USAA’s founders circumvented regulatory constraints to serve a class of consumers who had been locked out of the market.

Could State Farm’s origin story point insurance leaders toward new ways to serve consumers who expect to conduct business exclusively on their mobile devices? Could Nationwide’s early years help the industry see the path forward in a changing climate? Could USAA’s founders inspire new ways for insurers to meet the needs of risk-averse and asset-constrained millennials?

The insurance industry, as we know it, was built by people seeking greater protection and security for themselves, their families and their communities. Understanding their stories can help legacy insurers and industry upstarts find connections with their collective past — and find the paths toward a new era of prosperity.

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