Report: P/C Insurers Saw Modest Increase in Ad Spending in 2012

A recently released report from SNL Financial showed that the property/casualty insurance industry boosted ad spending last year at a much lower rate than in 2011 and that GEICO remains the top spender on ads.

Ad spending across the industry rose by about 3.7 percent between 2011 and 2012, much lower than the 13 percent increase the industry saw between 2010 and 2011.

The entire industry spent about $5.86 billion on ads last year. About 20 percent of that total was spent by GEICO.

A nearly 15 percent boost in ad expenditures at Allstate put it over State Farm, which reduced its marketing expenses by 4.4 percent in 2012 compared with 2011.

In 2012, Allstate spent $828.8 million in advertising compared with State Farm’s $777.9 million, according to SNL, which provides industry data analysis.

Allstate, which purchased Esurance in October 2011 in a bid against rivals GEICO and Progressive, has poured much of those expenditures into rebranding its purchased company as “insurance for the modern world,” according to SNL Financial.

“I think from my perspective, we acquired Esurance so that we could really compete effectively against GEICO and Progressive in that customer segment, and our goal was to grow that business economically,” Allstate CEO Don Civgin said in a transcript of a conference call provided by SNL Financial.

State Farm’s shrinking ad spend figures between 2011 and 2012 follows a 29 percent jump between 2010 and 2011.

Other p/c insurance companies spending less last year compared with 2011 were: Farmers, which spent 16.7 percent less in that period; Travelers, which spent 2.7 percent less; and American Family, which spent 8.4 percent less.

SNL Financial said its data showed “an apparent divide” in which insurance carriers spent more and less in ad expenditures, with Nationwide, Liberty Mutual, Amica and American International all showing year-over-year jumps in ad spend of more than 10 percent.

Like Allstate, American Family also underwent a major business transaction, completing a buyout Permanent General Companies, better known as insurance company The General, in a multimillion dollar purchase early this year.

Firm Notes Success for GEICO, Progressive

The report also showed that GEICO again led all p/c insurers with $1.12 billion spent in 2012, a 12.5 percent increase from the previous year, when it also showed the highest dollar amount spent on advertising.

And although Progressive spent less on advertising in 2012, SNL Financial said that senior management at the direct-to-consumer car insurance company are happy with a recent marketing study showing that Progressive and GEICO are “significantly ahead of their competitors” in being perceived as the top insurers providing the “best value.”

Progressive is now working to better perceptions of its quality, which has been showing “consistent improvement” since 2007, according to that study.

Esurance is the only insurer to improve its perceived quality in that time. Much of the increase was pegged to recent quarters, when Allstate’s major marketing of Esurance products was occurring, according to the firm.

GEICO’s money was well spent with “evident” success in advertising, according to SNL Financial, which noted “years of consistent premium growth” that positioned it for market share growth in personal car insurance. The market saw major developments last week, when the direct-to-consumer insurer overtook Allstate as the second-largest writer of personal auto coverage in the first quarter of 2013.

GEICO’s Growth Goes Back Years

Douglas Pawlowski, primary analyst at Fitch Ratings, told Online Auto Insurance News (OAIN) that State Farm and Allstate had a firm grip on first and second spots in market share, respectively, going back at least to 1996.

“It seems like, for the most part, those two had been relatively steady since ’96,” Pawlowski said in an interview with OAIN.

By 2002, however, Progressive and GEICO began making strides in the market. GEICO had the third-largest market share by 2008, according to Pawlowski, who said that the “trend has been happening for some time.”

“I wouldn’t think that this is much of a surprise to the industry,” he said about the recent news of GEICO’s growth in the first quarter, adding that it was a sign of “consumer preference.”

“You have consumers who have become more comfortable with purchasing insurance on the internet,” he told OAIN. “I think that you see that. Especially with Allstate purchasing Esurance, they feel like they have to have access to that direct-to-consumer channel.”

About Charles Nguyen
Charles Nguyen is an enterprising journalist who reported for and the Desert Dispatch and was the editor in chief of the Guardian (the twice-weekly newspaper at the University of California, San Diego) before coming to Online Auto Insurance News.

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