good morning. State Farm CEO John Farney is transforming the future of the nation’s largest auto and home insurance company while addressing today’s realities. The 104-year-old mutual insurance company just launched Next Generation Good Neighbor, an AI-powered tool that makes it easier for customers to file insurance claims. State Farm had a great year on several fronts. At the same time, the company is facing legal action from California regulators for mishandling claims from last year’s LA wildfires. Fernie said climate change and regulatory challenges are making it difficult for the state to operate. I spoke to Fernie about leading change in this environment.
About making money: State Farm delivered record results in 2025, announcing its largest ever $5 billion dividend to auto policyholders. But the company also raised homeowner rates in California, insured more than 1 million homes, and paid out more than $5.7 billion in wildfire claims. The economy is tough. “Our company, which provides homeowners insurance in California, was worth $4 billion in 2017 and is worth much less than that now,” he told me. “We have a choice to make, because our number one thing is to keep our promise to our customers.”
Considering the climate: Industry risk models have not kept pace with reality. “Tornadoes used to be isolated events, going to one town and helping that town rebuild,” Fernie said. “Right now we have tornadoes hitting 10 different places on the same night.” His prescription is to adjust prices to individual risk and insist on a competitive market. “When there is a market where regulators influence the ability of insurers to compete, it is hard to believe that customers will win.”
About the power of AI: Fernie this week announced its “Human + Digital” initiative, which includes a partnership with OpenAI and new AI tools to speed claims and accelerate underwriting. (His blog post has more details.) “We don’t want to be the 1971 company that Barry Manilow wrote about. We want to be the next generation’s good neighbor, leveraging technology and AI and a culture of speed,” he said. “Our message is that we believe these are powerful tools to position State Farm for success for decades to come. We want the right combination of the right people for the moments that matter most, and great technology that puts customers in control.”
Contact CEO Daily via Diane Brady at diane.brady@fortune.com.
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