State Farm and Jeep abandon middlemen - by Arnold Engel
Margin Points
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State Farm and Jeep abandon middlemen<br>State Farm drops bombshell on its agents. Jeep (Stellantis) runs around its dealers.<br>Jun 17, 2026
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Text within this block will maintain its original spacing when publishedwhat everyone is missing today:<br>the same squeeze is impacting middlemen in auto insurance and car dealers differently
You are treated to a weekend in Vegas, a concert by Pink, and a live performance by Jimmy Fallon. At the end of all that, State Farm, your company, who brought you out to Sin City on a boondoggle, drops a doozy into your email inbox, according to reporting today in the Wall Street Journal. Your whole comp structure is changing and there is no more coasting off of the hard work you did years ago building your book of business. State Farm has decided that the good neighbor should now have AI doing a lot of work behind the scenes and you should be taking home less, maybe even 40% less. People very much don’t like when assets they hold (their book of business) get revalued on them after they have done the work of building.1<br>While State Farm cuts comp for its agents, Jeep-maker Stellantis (also Chrysler, Dodge, Ram owner) has decided to cut out its own middlemen dealerships through an end-run relationship with Carvana. It’s fruit from the same tree. As we saw in May, this deal allows Carvana to sell across the country from a Casa Grande, Arizona, dealership that Carvana bought about a year ago. It is now the biggest car dealer for Stellantis in the U.S. Car dealers are rightfully worried about Carvana selling new cars.<br>OK—sure, it’s a squeeze play for Stellantis and State Farm bearing down on their dealers and agents. State Farm is distinct because they don’t have shareholders in the traditional sense—it’s a mutual—but it does have customers that want low prices. In a mutual, the customers call the shots—so I guess as a policyholder I’m part of the squeeze.2<br>We want low prices! Why do we want them? It’s not about the insurance, it’s about the cars. Cars are a bundled good. You need to buy insurance to go with your car.3 If the price of cars goes up, there is more price shopping for insurance. If the price of insurance goes up, there is more price shopping for cars. There is only so much money and they both come from the same wallet at the same decision point. Consumers are squeezing here and they don’t do it with discretion—they need relief—and want it coming from insurance and the car itself. This isn’t like cars and groceries or even cars and gas. High insurance costs are directly tied to the purchase, obvious at purchase and have little chance of going down in the mind of the consumer, unlike high gas prices.4<br>The price of cars and the price of insurance have both gone up. Insurance costs have climbed 38% for State Farm auto coverage since 2021. Consumers don’t just throw up their hands, they start to shop around more. Sometimes much more. Sometimes they even hire a professional car buyer to help them negotiate. It’s real out there.<br>The middleman local agent has been losing share in the auto market to the direct option (no agent required) from Progressive. State Farm has 19,000 agents and now wants to make sure they are pushed out or whipped into shape. As a mutual, it’s the customers pushing for that and saying they want to spend the money elsewhere.<br>AI isn’t the driver for either State Farm or Stellantis,5 but it’s being positioned to take the heat by State Farm. That is misleading and we can see in the car dealership case that there is absolutely nothing related to AI driving that squeeze. Stellantis isn’t messaging that AI has pushed them to work with Carvana.<br>State Farm is rolling out an AI generated “instant summary of each household’s active concerns and tailored product recommendations.” This reads to agents like help us fill in the info on these customers please so we can phase you out even more. Tough spot to be in for the insurance agents.6 The car dealers just have to compete with Carvana, there seems to be no stipulation that they have to help train a car salesman AI7 to minimize their role.<br>The car dealers do have some advantages to coping with this squeeze. They can approach Ford, GM, Toyota or others while State Farm agents don’t have the same options.<br>The car purchase price swinging down won’t lead to consumers wanting to spend more on insurance. If consumers can pick between paying $50 more a month on insurance vs getting a $50 a month nicer car—if they have to pick one and costs are equal—they are picking the nicer car rather than having the money disappear to insurance sales commissions.<br>Amidst the squeeze, consumers should start to see savings on the $71 billion of car insurance premiums that go each year to State Farm.<br>Car dealers, in some Southern markets at least, have a more powerful tie in the local ecosystem than insurance agents. If you are looking for sports...