Auto insurers spent more than $10 billion on advertising in 2021, an increase of 3% from the previous year, despite concerns about rising claims costs, according to a recent study by Dowling & Partners Securities, LLC.
The report found that while many auto insurers were scaling back their ad spending, others – most notably Allstate – were spending more. The study indicates that the overall results were heavily influenced by GEICO, which cut back its spending by 4%, the carrier’s first decrease since 2001, although despite its cutback, GEICO led all auto insurers with $2.07 billion in advertising spending in 2021.
“Advertising is an important component of the competitive landscape in personal auto, acting as a lever for managing growth which can be dialled up in times of favourable underwriting and scaled back in times of stress,” the study said. “With advertising a key non-rate ‘tool’ to turn on/off the growth spigot for direct writers during periods of price correction, other direct writers similarly significantly reduced spend in 2021. Until insurers return closer to rate adequacy and are ready to pivot towards growth, we expect advertising to continue to slow.”
A “standout” among companies bucking the trend in 2021 is Allstate, which increased its advertising spend by 29%, and by another 9.9% in the first quarter of 2022. Allstate’s spending in 2021 hit a record $1.3 billion. The study quotes Glenn Shapiro, Allstate’s president of property-liability, in a Q1 2022 call with investors: “A number of companies publicly talked about pulling back from marketing that left from the supply and demand curve of marketing costs that left it reasonable, and there was good economics on it, plus a lot of business gets sold in the first quarter.”
The top 20 advertisers represented 93% of the total expenditure, the study showed that while the companies in the top five – GEICO, Progressive, Allstate, State Farm, and Liberty Mutual – were unchanged, Allstate’s 29% growth in spending moved it to third on the list, bumping State Farm to fourth.
Perhaps it’s worth noting that all five of the biggest spenders did poorly in the CRASH Network’s 2022 Insurer Report Card, which asks repairers to rate carriers based on how well their “claims handling policies, attitude and payment practices ensure quality repairs and customer service for motorists.” All five placed in the bottom fifth of the list, with grades ranging from C to D-plus.
“The results show that many of the insurers getting the highest grades are smaller, regional insurance companies, ones that many consumers may not be familiar with because these companies do not spend billions of dollars per year on advertising,” the Report Card says.
This article courtesy of John Huetter of Repairer Driven Education, who was provided a copy of the Dowling & Partners report which is reproduced with their permission. Check out the website at: http://www.repairerdrivennews.com/.