Geico, billionaire investor Warren Buffett’s auto insurer, spent far more than property insurance peers on advertising in 2011, both on an absolute basis and as a percentage of the business the company wrote, according to a new study.
Data provider SNL Financial found Geico had spent about $994 million on advertising in 2011. That was fully 22 percent more than next-largest spender State Farm, even though State Farm’s ad spending grew at nearly three times the rate Geico’s did.
Anyone who has watched television in the United States even briefly knows the Geico brand — talking British geckos, erudite cavemen, greasy-haired announcers with mock baritones, all of them essentially running gags used to get the company’s name to stick in peoples’ heads.
Buffett likes to say the Berkshire Hathaway unit can spend so aggressively because it keeps expenses low and can therefore advertise more to increase market share. The data showed, though, just how much more aggressive Geico is willing to be.
SNL found that Geico’s ad budget represented 6.5 percent of the premiums it wrote in 2011. Among the rest of the five largest auto insurers in the country, none spent more than 4.9 percent of premiums on ads. State Farm spent 1.7 percent of premiums on advertising.
For the whole industry, in fact, the average is just 2.4 percent.
[Allstate spent $745 million or 3.0 percent on advertising; Farmers spent $718 million or 4.9 percent and Progressive spent $536 million or 3.9 percent, according to SNL.]
Over the last 20 years, Geico’s share of the market has roughly quadrupled, for which the advertising program usually gets much of the credit.
Among U.S. auto insurers, Geico has a market share of about 8.5 percent, third behind Allstate Corp.’s 10.2 percent and State Farm’s 18.7 percent, according to the Insurance Information Institute.
Was this article valuable?
Here are more articles you may enjoy.