I’m not near as smart as Buffett or the people running GEICO but I can tell you why Progressive has a lower loss ratio. When you take an insured with Progressive with 25/50/25 liability and uninsured motorist and the insured has had three at fault accidents in the last three years and progressive is costing $1,400 every six months but GEICO insures this person with 100/300/50 liability with uninsured for $492.00 you can see why GEICO’s loss ration is higher. Also when we quote someone and they get a horrible credit score we can’t touch GEICO’s rate but if they get a high credit score we will be half of GEICO’s rate. So, GEICO is most competitive insuring people other companies don’t want.
Geico has often quoted people without running any reports, the customer falls for it and then gets a nasty surprise after the policy comes in after the reports have been run.
Geico is most competitive for folks that have less than steller credit (Many MUCH less than steller credit) and those that have some claims / tickets. The preferred customer (better credit score and no losses / tickets) almost always find a better rate with the preferred carriers.
I wouldn’t confuse selling low rates(even as some suspect they are doing it below their cost) with a carrier insuring preferred business. With some carriers, one has nothing to do with the other.
That is not Geico by itself. They have a HUGE insurance business without even counting Geico.
August 8, 2019 at 12:32 pm
lonestar says:
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Since Geico does not publicly disclose their books, it is hard to tell if they are playing by the same rules as everyone else. Many suspect they are actually selling policies below claims cost, as Berkshire Hathaway just uses the cash to invest in other areas, and that they do concern themselves with making a true underwriting profit.
It would be interesting to see the percent of drivers using telematics. A few years ago, the costs were quite high per driver. The other downside is that California’s Proposition 103 really diminishes the upside in that state.
Safeco does the telematics for 90 days to determine drivers habits. If the driver is stellar and careful, they get a nice discount on rates. If not, they get little or nothing off the rates.
I’m not near as smart as Buffett or the people running GEICO but I can tell you why Progressive has a lower loss ratio. When you take an insured with Progressive with 25/50/25 liability and uninsured motorist and the insured has had three at fault accidents in the last three years and progressive is costing $1,400 every six months but GEICO insures this person with 100/300/50 liability with uninsured for $492.00 you can see why GEICO’s loss ration is higher. Also when we quote someone and they get a horrible credit score we can’t touch GEICO’s rate but if they get a high credit score we will be half of GEICO’s rate. So, GEICO is most competitive insuring people other companies don’t want.
Geico has often quoted people without running any reports, the customer falls for it and then gets a nasty surprise after the policy comes in after the reports have been run.
Progressive also uses local agents for some of their business; the field underwriting may help as well.
They don’t run the reports after the person likes the quote but before binding the coverage?
Geico is most competitive for folks that have less than steller credit (Many MUCH less than steller credit) and those that have some claims / tickets. The preferred customer (better credit score and no losses / tickets) almost always find a better rate with the preferred carriers.
GEICO is the number 2 auto insurer in the nation. That’s no high risk company.
They said that about General Motors too.
I wouldn’t confuse selling low rates(even as some suspect they are doing it below their cost) with a carrier insuring preferred business. With some carriers, one has nothing to do with the other.
“Berkshire Hathaway’s overall insurance operations generated after-tax earnings from underwriting of $389 million in the first quarter this year”
AFTER TAX! Hardly sounds like they’re moving insurance below cost.
That is not Geico by itself. They have a HUGE insurance business without even counting Geico.
Since Geico does not publicly disclose their books, it is hard to tell if they are playing by the same rules as everyone else. Many suspect they are actually selling policies below claims cost, as Berkshire Hathaway just uses the cash to invest in other areas, and that they do concern themselves with making a true underwriting profit.
Oops. Meant to type “They DO NOT concern themselves with making a true underwriting profit.”
It would be interesting to see the percent of drivers using telematics. A few years ago, the costs were quite high per driver. The other downside is that California’s Proposition 103 really diminishes the upside in that state.
Safeco does the telematics for 90 days to determine drivers habits. If the driver is stellar and careful, they get a nice discount on rates. If not, they get little or nothing off the rates.
Telematics is all about gathering data on you and then selling that data. Don’t be fooled.