The marketing and advertising of auto insurance companies

The necessity for insurance has been on the rise for all people. Insurance

can cover nearly anything you need it to, whether it be your life, health, house, automobile

or just an item important to you. It gives a sense of relief in times that may be tragic and

can help cover the costs of unexpected accidents. Because of the high supply of coverage

and limited number of customers, the current insurance companies must find a way to

attract as many people as they can. The main way of attracting new customers is to

advertise and market your product. Insurance companies have taken this practice to a new

level as they have taken over mainstream television by having a plethora of commercials

for each different company. Even though they are spending so much money to advertise,

are they actually seeing a benefit from all these expenses? This paper will correlate the

amount of money being spent on this marketing to the success that each company is

having. Also the practices that each company is implementing in their approach for more

customers as well as the effect of the amount of new insurance companies on the prices for

coverage will be discussed.

Over the past few years the amount of insurance advertising has increased

drastically. You can see this through the amount and variation of advertisements that there

are today. Commercials are a main source of advertising and each company has created a

specific representative for their company. For example Geico has the gecko and the

cavemen, Progressive has Flo, Allstate has Dennis Haybert (deep voiced man on
commercial), and State Farm has various agents to demonstrate that they are trying to get

to know customers on a more personal level. To go along with these identities each firm

has a slogan. State Farm has “Like a good neighbor, State Farm is there”, Allstate has

“You’re in good hands”, Geico has “15 minutes could save you 15% or more on car

insurance”, and progressive has “think easier; think progressive”. Each of these companies

has worked their way into households across the nation due to their excessive advertising.

There was a report done that mentioned how a thirteen year old kid came home with a

good report card and told his parents that they could save on their car insurance. He was

referring to the good student driver discount that many of the companies offer. However

that isn’t the point of this story. The point is that this teenager, who is many years away

from driving, is already conscious of finding the best possible deal for insurance. That is

the effect of this amount of advertising. These companies are targeting as many people as

they possibly can. They are getting more diverse with their advertisements, now targeting

more than just TV commercials. Instead of straight advertisements through commercials,

they are now becoming sponsors of many important sporting events and other high profile

events. For example, State Farm has taken a big step into the sports world being one of the

bigger sponsors of the MLB World Series as seen through their logos being painted on the

first and third base sidelines as well as getting part of the name of a college football bowl

game. Other companies are starting to follow suit and we are seeing more college sports

sponsored by insurance companies. The reason the companies are so adamant about

getting their name out there is so that people will call for quotes. If they get the

opportunity to speak to a client about their rates, the more likely they are to sign them up.
Companies need to reach out to people so they have the chance to show people the

possibility that they offer better rates or coverage.

Along with the constant exposure the companies are trying to get through

the television, they are using different marketing tactics for different groups of people. On

the State Farm website there are different marketing ideas for each group of people. They

range from Asian to Latino and from teens to elderly people. For each of these groups

there is a list of different sponsored events relating to that group and different ways to

approach advertising to them. For example, for teenagers State Farm has listed under it the

sponsorships of the NBA all-star sweepstake with the IAd, Yahoo’s online dance

competition Ready, Set, Dance, and several different musical festivals. For Latino’s they

have sponsorships of Sábado Gigante one of the longest running Latino shows, the Latin

billboard awards, the ALMA awards, and the FIFA world cup. What this shows is that

companies are trying to figure out what appeals to people and are trying to exploit what

they learn to appear more likeable to different people. Companies use their mascots to

appear more consumer and family oriented. They look to come off as trustful as they can

so that people will have more faith with that provider.

Companies do go beyond mainstream media and try to get to people at a

personal level. They send out many different types of mail including postcards,

informational brochures, and sometimes they even send out hand written cards or letters.

When speaking with a representative of the company’s marketing team, we went through

many of the different types of mailers that State Farm sends out and she made the point

that they try to seem as friendly as possible. One of the postcards we looked at had a
picture of a dog with its head out the window. Needless to say that this picture really has

nothing to do with what the company does but it shows a lighter side of the company that

is trying to connect with people.

According to Advertising Age magazine, counting only a few of the leading

companies, the cost of their advertising is easily reaching amounts of over two billion

dollars. That isn’t even counting some of the less popular or smaller firms. That number

is from only four firms including Allstate, Geico, Progressive, and State Farm. In 2009

Allstate spent $390 million in advertising. Geico came in well ahead of that, spending in

excess of $612 million, Progressive spent $517 million, and State Farm $550 million.

There are plenty of other firms that are now starting to advertise more and are trying to get

more business including Farmers Insurance and The General. People have arguments

about the way these companies are using their money. Customers are starting to wonder

why rates for insurance are increasing whilst companies spend hundreds of millions during

a year. As customers are paying more and more for insurance, companies are busy making

more ads to show the possibility that they are offering lower prices that another company.

All of the commercials on the air today are pushing the fact that they may have better

discounts to offer or their prices are lower. Some use examples of how prices they offer

are lower than their competitors. All of this is done so that the companies can get potential

customers to second-guess themselves on whether or not they are getting the cheapest price

for their insurance. They want people to be second-guessing themselves so that people

will inquire about prices. The companies need this because when people are inquiring

about prices, the companies get the chance to sell their product.
 As you can see, Geico is the leader of the pack when it comes to spending

on advertising. State Farm is second spending sixty million less. Rounding out the top

four taking third and fourth is Progressive and Allstate respectively. However this does

not correlate to their rankings in how much of the market share they own.

Geico is third in rank of owning market shares however they have seen the

biggest increase with 2%. Allstate is the only one to see a loss, and not much has changed

for State Farm and Progressive. In 2005 Geico spent $403.4 million, State Farm spent

$321.3 million, Allstate spent $289.6 million and progressive spent $252.6 million. All of

these companies have increased spending by over one hundred million dollars in four

years. Geico has seen the biggest increase in market share but have increased advertising

costs by over 200 million dollars. That shows a 1% increase for every 100 million dollars

spent. So to put that into some perspective they would have to increase their costs by

nearly one billion dollars to catch up to State Farm. Competition is going beyond just

commercials as some companies are challenging the current market shares of others.
Allstate released a statement saying that they plan to overtake state farm in the next 10

years. This won’t be an easy task considering Allstate needs to nearly double its market

shares just to be equal with State Farm. State Farm is the clear leader in terms of market

share ownership and with the amount of money they put into marketing and advertising, it

is clear that they don’t want that to change anytime soon.

Companies try to implement the thought that people need as much

insurance as possible for fear of losing other things than just their car, coverage, or

increase in rate. Some companies have reverted to scare tactics and are stretching the truth

to get people to be fully covered or at least buy more insurance. In an ad by Allstate set in

a courtroom a young man is held liable by a judge for $100,000 after a car crash, but he is

covered for only $50,000. The plaintiff’s attorney points out that the defendant can pay the

balance of the judgment with his college fund. The ad implies that the greedy plaintiff’s

attorney and the court system are the villains. What this is ad is trying to say is that if

you’re not properly covered with enough insurance, your assets can be taken from you if

you get into an accident. Allstate is trying to scare people into making sure that they are

covered enough or buying more insurance to get that type of coverage.

In conclusion, these companies are

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to-perpetuate-misrepresentations-of-the-justice-system.aspx?googleid=283830
3.

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