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Business Q&A -- Steve Snowden

Q&A appears Mondays on the Mail Tribune's business page. It provides local leaders a venue to address timely issues in the business community.

Steve Snowden, 49, is a two-time recipient of the General Agents and Managers Conference National Management Award; and formerly elected as agency director for State Farm in Oregon. He and his wife Sharon live in Central Point. They have three children, Michael, 24, with Northwest Business Systems of Medford; Jonathan, a senior at Southern Oregon University; and Catherine, 13, a Scenic eighth-grader.

Q: How different are the events of Sept. 11 compared to a natural disaster for insurance companies, and what elements change a company's ability to respond?

This type of a catastrophe is simply unprecedented. We already know it will be the costliest man-made disaster in U.S. history.

Estimates run well into the billions. And unlike, say, a hurricane, the damage from Sept. 11 is centered in commercial property in a major metropolitan area. Sadly, another difference from most natural disasters is the unspeakable loss of life in this case, which means companies will be handling an extraordinary number of life insurance claims.

That said, State Farm is responding as we would in a natural disaster. We have mobilized our catastrophe response teams, and our agents and claims representatives are in the affected areas processing claims. We are an organization of people devoted to helping others recover from the unexpected. Times like these are when our customers rely on us most, and we will keep our promises.

Q: What's the difference between an insurance company and a reinsurer, and who has the most exposure at a time like this?

Reinsurance is what insurance companies buy to protect them from a catastrophic loss. Reinsurance companies assume part of the risk - and part of the premium - originally taken by the primary insurer. Because of the size and scope of the damage, both primary insurers and reinsurers face significant exposure. I might add that State Farm does not insure large structures like the World Trade Center. Some of our small business and auto customers are impacted.

Q: How soon and how much will Southern Oregonians see their premiums rise? Are we looking at months or years before the impact ends?

It's unlikely Southern Oregonians will see premiums increase as a direct result of this disaster. Insurance rates are based on expected future losses, and are set on a state-by-state basis to reflect loss experience in that state. In other words, customers in Oregon do not pay for catastrophes in other states. Also, we already factor into rates an amount for possible catastrophe losses over a 10- to 30-year cycle.

Q: How do insurance companies invest premiums?

Again, I can't speak for other companies, but State Farm's investments are primarily in bonds and stocks, and, to a lesser extent, real estate.

It's worth pointing out that State Farm is a mutual company. We are owned not by stockholders but by our policyholders. One benefit in times like this is we don't have to worry about our own value in the stock market. This also allows us the advantage of taking a longer-term view with our investments.

Q: How do car insurance rates here compare to other areas around the state and what does it say about our driving?

In general, drivers in Medford pay less for auto insurance than drivers in larger, metropolitan areas. That's because, quite frankly, there are fewer accidents here. Drivers in Portland, for example, deal with much higher traffic volume and congestion. The result is more accidents per car.

But location is only one factor in the cost of auto insurance. There's also the make of car, age of driver, number of miles driven, deductible amount, coverage options, and so on.

To suggest a subject for this column, please contact business reporter Greg Stiles at 776-4463 or e-mail