P&C Specialist article focuses on recent State Farm auto claim practice shifts

A new P&C Specialist article explores a change in State Farm auto claim practices, which includes cutting labor rates and the use of centralized auto claim audit teams. 

“The Bloomington, Illinois-based insurer has lowered labor rates by as much 20% in the past eight months, depending on the location of the repair shop,” the article says “It is also increasingly leveraging its audit team to review estimates written by its own staff adjusters and has modified policy language related to reimbursements for labor, sources said.” 

The industry publication, published by Financial Times, says it interviewed more than a dozen repair shops and reviewed internal recordings and documents “showing how State Farm’s approach often turns fixing damaged autos into an opaque, adversarial process, creating friction between repair shops and the insurer.”

The article notes that while the insurer is working to lower repair costs, it is also facing regulatory scrutiny and profitability concerns as complex repairs push up claim costs higher. 

“Tightening control over claim costs is one way personal lines carriers like State Farm try to protect profit margins as they vie for market share by lowering premiums and increasing ad spend to attract customers,” the P&C Specialist article says. 

State Farm has faced criticism, lawsuits, and drawn-out regulatory processes in recent years, from California to its home state of Illinois, for increasing homeowner rates by the double digits. 

It also received criticism last year at the federal level during a Senate subcommittee hearing that investigated claims handling led by Sen. Josh Hawley (R-Missouri). 

While State Farm has claimed costly disasters, such as the wildfires in California, have forced it to increase rates, the company also ended 2025 with a net income of $12.9 billion. That was more than double its $5.3 billion net income in 2024, a year when the company’s CEO received a $834,506 bump in pay. 

Aaron Schulenburg, executive director of the Society of Collision Repair Specialists (SCRS), told P&C Specialist that repairers across the country are reporting reduced reimbursement for labor rates and increased pressure against following safety inspections and other critical repair operations. 

“At the same time, [repairers] obligations and costs are rising,” Schulenburg said. “Materials cost more. Labor costs more. Complexity drives more repair expenses.” 

Schulenburg started a conversation about State Farm’s systemic lowering of labor rates during a Collision Industry Conference (CIC) meeting open mic session in November. 

He pointed to stories by Jay Sicht, Fender Bender and ABRN editor-in-chief, and John Yoswick, editor of the CRASH Network subscription newsletter. 

In July, Sicht reported that 57% of 230 respondents to a survey said State Farm had reduced its labor rates offered to their shop without explanation. 

A CRASH Network’s quarterly “Collision Industry Business Perspectives” survey also found that 1 in 4 of 300 shop respondents said one insurance company is currently paying a lower labor rate than it was back in January. 

“State Farm was the most common insurer cited by survey respondents, and the labor rate decreases weren’t insignificant,” Yoswick said in sharing some of the survey findings with RDN. 

“State Farm went from $60 per hour to $55 per hour, and we are not a DRP for them,” one shop wrote of the 8.3% drop.  

“Not a DRP, but State Farm has lowered their rates in my market two separate times, once from $74 to $70, and then to $65,” another respondent said (a 12.1% decrease).  

While the bulk of labor rate decreases reported through the survey involved State Farm, about a dozen shops pointed to other insurers that had dropped rates this year. 

“Historically, State Farm set labor rates for independent repair shops through annual surveys of repair shops,” the P&C Specialist article says. “The insurer calculated what it called a “prevailing competitive price” for each region based on labor rates submitted by collision shops via an online portal.” 

The article says State Farm “tweaked” its policy terms in multiple states between late 2024 and early 2025. A clause was added stating that the insurer can determine labor and repair costs based on what it decides is a “reasonable rate.”

Schulenburg discussed these labor rate policy changes, along with other policy changes, such as the removal of appraisal clauses, during an Automotive Insights Symposium held by the Federal Reserve Bank of Chicago in February. 

P&C Specialist reports that phone recordings and emails between State Farm and shops show labor rates were reduced by double digits multiple times in the past year. One shop in the Midwest told the publication that their rate was reduced from $74 to $70 and then to $64 within 10 months. 

“When compensation fails to reflect the true cost of proper repairs, it places an unsustainable burden on the small businesses responsible for returning vehicles to the roadway safely. It limits the industry’s ability to attract and retain skilled professionals — and ultimately compromises outcomes for consumers,” Michael Bradshaw, vice president of K&M Collision in Hickory, North Carolina, told the publication. 

State Farm is also centralizing auto claim audit teams, similar to how it handles homeowners’ claims, the article says. 

“The team reviews estimates prepared by third-party shops as well as its own staff adjusters. Internal emails and documents show that estimates are sometimes revised even after approval by staff adjusters, with cuts to the time allowed for labor, certain repair procedures, and prices for parts,” according to the article. 

During the U.S. Senate hearing, Hawley focused on testimony from adjusters who claimed they had pressure from State Farm and Allstate to lower damage estimates. 

Jordan Hendler, Washington Metropolitan Auto Body Association (WMABA) executive director, spoke about the difficulty speaking with claim centers during a recent hearing on a Virginia bill that would require insurance companies to offer a detailed explanation anytime they lower an adjuster’s initial estimate or report. 

Repairers, by helping consumers, witness the difficulties in reaching claim centers, which have transitioned from regional to centralized hubs, she said. 

“Instead of somebody [insurance representative] that you can look to and talk to in person, it is now done remote using AI, rule strategies, and other things that when explanations come back, it is using quotes like, ‘The manager said,’ and there is no name associated and no explanation,” Hendler said. 

Hendler also wrote an official letter of support for the bill that outlines a systemic lack of transparency in the claims process, which allows companies to modify adjusters’ reports behind the scenes and often reduce the payout without the consumer knowing why. 

Schulenburg told the P&C specialist that the centralized audit claim teams reduce local autonomy and increase disputes over operations that are increasingly necessary on modern vehicles. 

The article also touches on the continuous battle shops are facing with the insurance industry regarding calibrations. 

“ADAS repairs typically involve multiple calibrations to ensure systems like automatic braking, lane-keeping assist, and adaptive cruise control function properly,” the article says. “They usually require specialized equipment, controlled environments, and trained technicians, and often cost thousands of dollars per repair. Even minor dings, such as a light tap to the bumper without visible damage, can misalign sensors, cameras, and radar systems.” 

State Farm, GEICO, and Allstate are released calibration programs last summer. 

The repair industry has been vocal that calibration costs are dynamic and standardized pricing created by the insurance companies doesn’t encompass the total cost to complete a proper repair with OEM tooling, procedures, and trained technical labor. For example, industry officials told Repairer Driven News in April that they felt pricing pressure from State Farm following its rollout. 

Last year, State Farm also sent an email to its National Glass Program requesting that they provide a recalibration failure report when requesting the authorization for OEM glass if the installed non-OEM windshield can’t be calibrated. Yet, procedures from multiple OEMs include the use of OEM glass to complete a proper repair, with Volvo and GM releasing position statements on the topic in recent years. 

Repair shops told P&C specialists about concerns that State Farm’s cuts will ripple throughout the auto insurance industry. 

“Other auto insurers not only follow State Farm’s lead but will often lower the rate they propose to pay a few dollars per hour below State Farm’s rate, thus exacerbating the suppression of collision repair labor rates,” said Erica Eversman, Vehicle Information Services chief counsel, in the article. 

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