GEICO will outspend everyone by a large margin and they certainly have the goofiest ads ever. I have two favorites for goofiness. 1. The young bearded Millennial with his two buddies on their cells ran out of gas in the middle of the desert because they were too stupid to get gas 50 miles back so they just pulled up the roadside assistance app to bring them gas. 2. The hairy man child pulled up his golf cart to play with pro’s, hit several carts forward and backward and then asked the pro’s if they were playing the tips.
Since Warren Buffett dba Berkshire Hathaway also owns his own reinsurance company, General Re, he can (and does) sell himself his own reinsurance from his own reinsurer, thus reducing Geico’s costs, and thus increasing their competitiveness. Fair? Maybe. Perhaps other retail insurers should buy their own reinsurers, to create a similar advantage? Retailers owning wholesalers?! :-)
I would agree that Buffet’s ownership probably allows Geico to be more aggressive with reserving practices and possibly some expense reductions in other areas. But I wouldn’t think there would be a great need for reinsurance since the majority of Geico’s business is auto.
Well, it appears there is something wrong with State Farm’s model after they lost $7 Billion on Personal Auto last year. Result was closing 11 offices and either laying off or re-assigning 4,200 employees.
I hope you don’t think that reinsurance is a magic bucket that makes losses disappear. If Gen Re sells reinsurance to GEICO, that means that Gen Re pays for a portion of GEICO’s losses. Gen Re uses the premium that GEICO pays it to pay those reinsurance losses. If Gen Re gives GEICO a sweetheart deal, it just means that Berkshire loses money in Gen Re rather than GEICO.
GEICO will outspend everyone by a large margin and they certainly have the goofiest ads ever. I have two favorites for goofiness. 1. The young bearded Millennial with his two buddies on their cells ran out of gas in the middle of the desert because they were too stupid to get gas 50 miles back so they just pulled up the roadside assistance app to bring them gas. 2. The hairy man child pulled up his golf cart to play with pro’s, hit several carts forward and backward and then asked the pro’s if they were playing the tips.
Since Warren Buffett dba Berkshire Hathaway also owns his own reinsurance company, General Re, he can (and does) sell himself his own reinsurance from his own reinsurer, thus reducing Geico’s costs, and thus increasing their competitiveness. Fair? Maybe. Perhaps other retail insurers should buy their own reinsurers, to create a similar advantage? Retailers owning wholesalers?! :-)
I would agree that Buffet’s ownership probably allows Geico to be more aggressive with reserving practices and possibly some expense reductions in other areas. But I wouldn’t think there would be a great need for reinsurance since the majority of Geico’s business is auto.
Well, it appears there is something wrong with State Farm’s model after they lost $7 Billion on Personal Auto last year. Result was closing 11 offices and either laying off or re-assigning 4,200 employees.
I hope you don’t think that reinsurance is a magic bucket that makes losses disappear. If Gen Re sells reinsurance to GEICO, that means that Gen Re pays for a portion of GEICO’s losses. Gen Re uses the premium that GEICO pays it to pay those reinsurance losses. If Gen Re gives GEICO a sweetheart deal, it just means that Berkshire loses money in Gen Re rather than GEICO.