Reader’s Question:

I was making a list of quotes from insurance companies, and then my dad picks up the word “state.” He asked me if we had a state auto insurance company here in the US. So… do we have one? If we do, what’s the difference between a private and state auto insurance company?

Jose G. O.

Santa Fe, NM

Perhaps your dad heard the name of a privately-owned company (State Auto Insurance Company) rather than a state-owned insurance company. In any case: no, we don’t have a state-owned auto insurance company here in the US. What we do have, though, is an insurance agency in each state that monitors the progress and operations of the insurance companies in their respective states. That’s for your first question.

With regard to your second question, the broad answer is relatively simple: a state auto insurance company is owned by the government, while a private auto insurance company is owned by an individual or group of entrepreneurs who are profit-oriented. That’s the simplest possible answer without getting too technical in the discussion.

The government doesn’t find it practical to maintain a state-owned auto insurance company, since there are many privately owned insurance companies who are perfectly able to do the job for them. In addition, the quality of services and the prices of policies are controlled by the innate competition that exists in a free market. In a way, you could say that privately-owned companies are the expression of the fundamental principles of the US federal government.