State Farm, Penn State and Advertising Dollars
I was just quoted this morning on A.M. Best’s Best Review on the decision made yesterday by State Farm to drop advertising for Penn State football. The reporter wanted to get my take. I think it’s curious that State Farm dropped just football, and not the other sports. The people running the football program are no longer there, the program has been severely penalized, and the other sports it still supports were led by the same athletic director and president leading the football operation. I also wonder how they will respond to criminal issues that come up at other schools they sponsor. Will they take the same hard line?
You need a subscription to read the story online, so I am sending it to you here. I welcome your comments…
Best’s News Service – July 25, 2012 11:22 AM
Consultant: Insurers Should Revisit Advertising Support as State Farm Drops Penn State Football Sponsorship
BLOOMINGTON, Ill. – In the latest fallout from the Pennsylvania State University child sex-abuse scandal, State Farm
said it won’t renew its sponsorship of the university’s football team for 2012. It’s a move consultant says should
awaken all insurers to revisiting their advertising support and “predetermine what will make them stay on or jump
ship.”
State Farm recently did an annual review of all of its National Collegiate Athletic Association sponsorships, and
decided not to renew its sponsorship for Penn State football for the 2012 season, said Jeff McCollum, a spokesman for
State Farm, Bloomington, Ill. McCollum declined to disclose how much State Farm has spent on the Penn State football
sponsorship.
In June, former assistant Penn State University football coach Gerald Sandusky was convicted of 45 counts of sexually
abusing 10 boys.
When the Sandusky news broke last fall, State Farm decided to pull advertising, McColllum said, noting there are no
State Farm signs in Beaver Stadium now. “We continue to support Penn State basketball, and will review our NCAA
sponsorships next year as we do every year,” McCollum said. The company will no longer advertise during television and
radio broadcasts of the Nittany Lions’ home games.
Recently, State Farm Fire and Casualty Co. asked a federal judge to declare the company is not required to indemnify
Sandusky. In a suit filed in the U.S. District Court for the Middle District of Pennsylvania, the company argues
Sandusky’s homeowners insurance policy should be declared void because it violates several exclusions written into it
(Best’s News Service, July 23, 2012).
Dan Weedin, president of Toro Consulting Inc., said he found State Farm’s support for other Penn State programs and
the NCAA curious and “very unique.” When Accenture dropped golfer Tiger Woods after his domestic issues, “they were
basically dropping the brand,” said Weedin, an insurance consultant who helps clients create and enhance risk and
crisis management programs. State Farm has “penalized” only the football program where none of the perpetrators are
anymore, and continues to support other Penn State programs and college football nationally, he said.
“The question becomes, what metrics are being used to make these decisions?” Weedin said.
Weedin says he understands State Farm’s intent, “however I think they need to take a stand one way or the other.” As
far as a global perspective, “insurers should revisit their advertising support at all levels and predetermine what
will make them stay on or jump ship,” Weedin said. “Decisions made in real time may end up being poor. They need to
determine their own risk tolerance when it comes to advertising and support and make the decision before it needs to
be made.”
On July 23, the NCAA sanctioned Penn State’s football program based on the findings of an investigation led by former
FBI director Louis J. Freeh. The investigation determined officials at the school, including the late football coach
Joe Paterno, engaged in a cover-up of Sandusky’s behavior, including some criminal events that occurred on Penn
State’s campus. The NCAA penalized the program by vacating all of the university’s football wins from 1998 to 2011.
The school was also hit with a $60 million fine, a four-year post-season ban, and the initial loss of 10 scholarships
and 20 total scholarships each year for a four-year period (Best’s News Service, July 23, 2012).
State Farm Mutual Automobile Insurance Co. currently has a Best’s Financial Strength Rating A++ (Superior).
(By Fran Matso Lysiak, senior associate editor, BestWeek: fran.lysiak@ambest.com) BN-NJ-07-25-2012 1121 ET
