Here's a fun one: State Farm, the largest auto insurer in the United States — a mutual company, meaning a company that belongs to its policyholders, not to Wall Street shareholders — just announced it's returning $5 billion in dividends to customers. That works out to roughly $100 per insured car.

A hundred bucks. Doesn't sound like much, right?

But hold on. Put it in perspective.

The model nobody tells you about

State Farm isn't just any insurer. It's a mutual. That means no publicly traded stock, no CEO drooling over quarterly bonuses, no hedge fund breathing down their neck for "shareholder returns." The owners of the company are... the customers themselves.

When the company profits more than it needs to cover claims and maintain healthy reserves, it returns the surplus. Simple as that. No gimmicks, no "disruptive cashback" marketing, no influencer doing a dance on TikTok.

It's the model Benjamin Graham would have loved. It's skin in the game in its purest form. You pay your premium, the company manages the risk, and if there's money left over, it comes back to you. Damn, what a revolutionary concept, right?

Meanwhile, in Brazil...

Over there, the auto insurance market is a festival of opacity. You get that fat bill with a 15%, 20%, sometimes 30% rate hike, and the explanation is always the same tired song and dance: "increased claims frequency," "cost of imported parts," "sector inflation." All very vague. All very convenient.

Brazil's major insurers — which are subsidiaries of big banks or financial conglomerates — operate under a model where profits go to the shareholders, losses go to the customers, and the opacity goes into the annual report nobody reads.

I'm not saying the mutual model is perfect. State Farm itself got its ass kicked in 2023, reporting billions in losses from climate catastrophes and repair cost inflation. It had to request premium increases in multiple states. California became a full-blown nightmare — the company actually stopped writing new policies there.

But here's the point: when the house gets its act together, the money goes back to the owner. And the owner is the customer.

What $5 billion really means

Let's do some back-of-the-napkin math. State Farm has roughly 50 million auto policies. Five billion divided by 50 million comes out to a hundred bucks per vehicle. It's not going to change anyone's life. It's not going to cover a down payment on a new car.

But the signal it sends is massive.

It means the company generated enough cash to return a truckload of money after covering all claims, operating expenses, and prudential reserves. It means the business model is healthy. It means risk management worked.

Compare that with what's happened in the American insurance market over the past few years: companies pulling out of entire states, premiums skyrocketing, smaller insurers going belly up. State Farm took its licks, but survived. And now it's giving money back.

It's like Rocky Balboa taking punches all night long, but at the end he's still standing while everyone else is on the mat.

The lesson the Brazilian market refuses to learn

The mutual model isn't anything new. It's been around for centuries. It works in insurance, it works in credit unions, it works across plenty of sectors. But it requires something that the Brazilian financial market hates: genuine alignment of interests between company and customer.

In Brazil, the preferred model is one where the bank sells you insurance at the teller window along with your checking account, charges whatever it wants, and the customer goes along with it because "it's from the bank, it must be good." Nassim Taleb would call this a perverse asymmetry — the ones setting the price don't suffer the consequences of getting it wrong.

State Farm returning five billion dollars is the kind of news that should spark a serious debate about how the insurance market works in Brazil. But it won't. Because the circus would rather talk about meme crypto and the next stock that's going to "moon."

So here's the uncomfortable question: do you know where your insurer's profits go?

Because State Farm knows. And it's sending them back.