Why Do So Many Car Insurance Companies Have ‘Farm’ in Their Names?

Have you ever wondered why so many car insurance companies have "farm" in their names? There's State Farm, Farmers, Farm Bureau, and a lot more, and most if not all of these companies serve more than just farmers. So why do they put "farm" in their names? The answer tells us a lot about why people pay different car insurance rates.

George Mecherle - The Godfather of Car Insurance 'Rating'

In the early 1920s, George Mecherle was a door-to-door car insurance salesman. George mostly worked the back-road farm areas, and thus he learned first-hand how outraged many farmers were over their car insurance rates. In those days, farmers were much poorer than their city-dwelling counterparts, and because they drove the rarely-traveled country roads, they were much less likely to get into accidents. And yet, in those days, everyone paid the same car insurance rates. This meant that farmers were subsidizing city-folk with their premiums, and since their income was so limited, this was a significant financial burden for farmers to bear.

George Mecherle saw how unfair this was, and when his bosses wouldn't change their policies, George decided to start his own company - State Farm Insurance. The company actually came into being on George's 45th birthday in 1922, and believe it or not, most industry experts expected State Farm to flop in no time. After all, charging people different car insurance rates based on the risk just wasn't the way business was done!

You Can Thank (or Blame) George for Your Low (or High) Rates

It didn't take long for George to prove the skeptics wrong. Originally, he could only sell to farmers since city drivers would have to pay higher rates with State Farm in order to compensate for risk. But soon, George had signed up enough farmers that other car insurance companies began to see the error of their ways. After all, without the farmers subsidizing the riskier city drivers, these other companies had to either raise their overall rates or begin emulating State Farm's business model. If they raised their rates, then even more farmers would defect to State Farm, and if they began charging different people different rates, then this meant that city drivers would now find State Farm more attractive. State Farm's competitors were in a lose-lose situation.

But before all of the other car insurance companies could copy State Farm's rating system, other small, regional car insurance companies that catered to farmers started popping up. This is why there are so many car insurance companies - to this day - with "farm" in their names. So if you pay comparatively low car insurance rates, then you have George Mecherle to thank, whether you are a farmer or not. Then again, if you pay higher rates, you have George to blame. Luckily, with carinsurancerates.com, you can almost always lower your rates by doing something that people in 1922 couldn't do - using the internet to comparison shop for the best deal on your car insurance!