Star mogul Warren E. Buffett loves New Jersey, at least its auto insurance market.
In his annual letter to shareholders of Berkshire Hathaway Inc. of which he is chairman, Buffett has high praise for the turnaround in the state’s auto insurance market and for outgoing Insurance Commissioner Holly Bakke for the way she and her staff handled the transformation.
Among Berkshire Hathaway’s insurance holdings is GEICO, the low- cost direct provider of auto insurance. Back in 1976, GEICO CEO Jack Byrne thought the New Jersey was so bad he withdrew his struggling company from the state, and from Massachusetts.
However, in 2003 New Jersey reformed its problem-laden auto insurance system with anti-fraud and more insurer-friendly rating systems. GEICO remained skeptical, according to Buffett, who writes that even with these changes, “one might have expected the state’s bureaucracy to make change slow and difficult.”
Buffett was pleasantly surprised that the state’s response was neither slow nor difficult.
“But just the opposite occurred,” Buffett writes, noting that the state’s insurance department moved swiftly to iron out details and quickly approved GEICO’s re-entry into the state last August
“Holly Bakke, the New Jersey insurance commissioner, who would be a success in any line of work, was determined to turn the law’s intent into reality, ” Buffett enthused in his letter.
There has been continued good news for Buffett from New Jersey. “Since then we’ve received a response from New Jersey drivers that is multiples of my expectations,” he notes.
GEICO now writes about 4 percent of the state’s auto market, with “word-of-mouth” recommendations continuing to spur inquiries. What’s more, Buffett reports, GEICO’s closure rate on prospects from New Jersey is “far higher” than it is nationally.
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