Auto insurers spent more than $10 billion on advertising in 2021, a 3% increase from the previous year, despite concerns about rising claims costs, according to a recent study by dowling & partners values, llc.
The report found that while many auto insurers were reducing their advertising spending, others, notably Allstate, were spending more. Overall results were heavily influenced by Geico, which cut expenses by 4%, the carrier’s first decline since 2001, according to the study.
Despite its downsizing, Geico led all auto insurers with $2.07 billion in ad spending in 2021, or about a fifth of the industry total, according to the study.
“Advertising is an important component of the competitive landscape in personal automobiles, as it acts as a lever to manage growth that can be marked in times of favorable underwriting and reduced in times of stress,” the study says.
“with advertising a key non-fee related ‘tool’ to turn on/off the growth spigot for direct issuers during periods of price correction, other direct issuers similarly cut spending significantly in 2021 …until insurers get back closer to rate adequacy and ready to pivot to growth, we expect advertising to continue to slow.”
Historically, carrier ad spend increased 10% in 2020, on top of an 18% increase in 2019.
a “standout” among companies bucking the trend in 2021, dowling & Partners said, it’s Allstate, which increased its ad spend by 29% and another 9.9% in the first quarter of 2022. Allstate’s spend in 2021 hit a record $1.3 billion.
The study quotes glenn shapiro, president of ownership-responsibility at allstate, in a first quarter 2022 call with investors: “a number of companies have spoken publicly about withdrawing from marketing that got off the supply-demand curve of cost of ownership. marketing that left reasonable, and there was good economics on it, plus a lot of business was sold in the first quarter.”
The top 20 advertisers accounted for 93% of total spend, according to the study. while companies in the top five (geico, progressive, allstate, state farm and freedom mutual) were unchanged, allstate’s 29% growth in spending moved it to third place on the list, displacing state farm to fourth.
state farm reduced its expenses by 8%, although the study notes that the figure is somewhat misleading. managers and agents received about $1.4 billion to spend on advertising, which, when added to the $1.1 billion in recorded advertising spending, would put state farm at the top of the list.
progressive, the second-largest advertiser, cut spending 4% to $1.87 billion. the reduction comes after several years of strong increases; progressive’s spend was 74% of that of rival geico in 2021, down from just 36% in 2016.
usaa, number eight on the list, posted the largest year-over-year decline, down 44% to $283 million. No. 10 nationally had the second largest decline, down 10% to $166 million, according to the study.
The rest of the top 10 was rounded out by number six, american family, up 14% to $376 million; number seven, farmers, down 2% to $346 million; and number nine, amica mutual, up 39% to $167 million.
allianz, which spent $29 million, or 130% more than in 2020, posted the largest percentage increases, and nj manufacturers group, which spent $95 million, or 127% more.
allianz and lemonade, the top spending insurtech companies, were new to the top 20 list in 2021, according to the study. They replaced the Erie Insurance Exchange and the Auto Club of Michigan.
dubbing & The partners provided a copy of their study to Repairer Driven News and the material is used with their permission.
It’s perhaps worth noting that the top five spenders fared poorly on the accident network’s 2022 Insurer Report Card, which asks repairmen to rate carriers based on what so well its “claim handling policies, attitude, and payment practices ensure quality repairs and customer service.” motorist service.” all ranked in the bottom fifth of the list, with grades ranging from c to d-plus.
“results show that many of the highest rated insurers are smaller regional insurance companies, which many consumers may not be familiar with because these companies do not spend billions of dollars a year on advertising” says the report. says.
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