Insurer to slice jobs in Frederick

State Farm to eliminate up to 500 positions as it consolidates in Va.

July 28, 2004|By Stacey Hirsh | Stacey Hirsh,SUN STAFF

State Farm Insurance Co. will cut 400 to 500 jobs at its Frederick Operations Center over the next 2 1/2 years as part of an effort to consolidate operations in the Mid-Atlantic region, the company said yesterday.

The company is combining its underwriting operations in Frederick with those at its Charlottesville Operations Center in Virginia. The Frederick facility employs 1,000. The Charlottesville facility employs 1,100 but is expected to grow by 200 to 300 workers as the businesses are combined.

The Bloomington, Ill.-based insurer also plans to cut claims offices in the region to 25 from 50. That includes eliminating four of the 10 claims offices in Maryland. Claims offices range from 10 employees to 75 employees, with a total of 1,600 employees in the region, said Matthew Greer, a spokesman for State Farm's Mid-Atlantic region, which includes Maryland, Virginia, Delaware, the District of Columbia, North Carolina and West Virginia.

State Farm's decision to consolidate in Virginia comes after a yearlong internal study of the company's operations in the Mid-Atlantic region. In the end, the company opted for Charlottesville because labor costs are lower.

"It's the best business decision we can make to balance the long-term benefits for our customers, the company and employees and agents," Greer said.

He said he could not quantify the wage difference, but "it is significant."

The Frederick office will continue processing claims from Maryland, Delaware, the District of Columbia and West Virginia, he said. Claims operations for Virginia and North Carolina will remain in Charlottesville, Greer said.

Aris Melissaratos, secretary of the Maryland Department of Business and Economic Development, said it was the best outcome possible after several months of talks between the company and the state.

He said State Farm refused incentive offers to keep the jobs in Maryland, a position he applauded. "They really are a good company, and they're doing the right thing," he said.

Melissaratos said he wasn't concerned that high labor costs in Frederick led State Farm to choose Virginia. He cited Frederick's low unemployment rate - 2.9 percent last month - and Frederick County's strong economy, fueled by job growth in biotechnology and engineering.

The first cuts aren't likely to happen for six months to a year.

State Farm plans to retain as many workers as possible during the consolidation, either by retraining them for new positions or offering them the chance to relocate, Greer said.

"Considering the fact that we're doing this over 2 1/2 years, we anticipate this will have minimal impact," Greer said.

Marie Keegin, director of the Frederick County Office of Economic Development, said the county has agencies to assist employees affected by the State Farm cuts. She also said the county has a strong financial and insurance industry base.

Frederick is the 10th-fastest-growing county in the country when it comes to employment. The number of jobs in the county grew by 3.8 percent from December 2002 to December 2003, according to a study by the U.S. Bureau of Labor Statistics. The average weekly wage was $724 in Frederick County at the end of last year, 5.6 percent less than the national average of $767.

"We are pleased in Frederick County that we have had, over the last two years, the No. 1 net new jobs in the state and we were just recognized as No. 10 in the country for new jobs, so this is an area that we're blessed with an abundance of good, new jobs," Keegin said. "That, matched with the duration of the time that State Farm is going to be making these changes, should help us keep their employees gainfully employed."

The Associated Press contributed to this article.

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