Geico Marketing Costs Near $1 Billion in Insurance Ad War
06/25/2012| 01:14pm US/Eastern
--Geico spent $993.8 million on marketing in 2011, according to SNL Financial
--Spending puts Geico atop ranking for property-casualty insurers
--State Farm ranks second at $813.5 million
(Adds figures for Progressive in the 11th paragraph.)
By Leslie Scism and Erik Holm
What is the cost of being everywhere? About $1 billion a year.
Geico Corp., the auto insurer whose advertising shows up on billboards, the Internet and many television shows, spent $993.8 million for marketing in 2011, according to data compiled by SNL Financial. That is the most in a single year by any car insurer, and is up 10% from the $902.7 million the company spent in 2010.
The increase in spending is part of a multi-year, still-escalating arms race of insurers who want to be even-bigger household names than they already are. State Farm Mutual Automobile Insurance Co., the largest home and auto insurer in the U.S. as measured by premium, took second place with a dramatic 29% increase in its marketing expenditures to $813.5 million, SNL found.
The surge by State Farm sent it past Allstate Corp. (>> The Allstate Corporation) in spending, according to SNL.
"It is not stopping, there are no signs of slowing down just yet," said Patrick Sullivan, a writer with trade publication Auto Insurance Report. "They are just marching along. It's pretty crazy."
Geico, owned by Warren Buffett's Berkshire Hathaway Inc. (BRKA, BRKB), didn't respond to several requests for comment. State Farm, known for its "Like a Good Neighbor" jingle, confirmed the accuracy of the SNL figures.
SNL compiled the list of big spenders from reports filed with state-insurance departments earlier this year. The data firm examined the reports of property-casualty insurers, whatever their business lines. The insurers are required to tally marketing expenditures for newspaper, billboard and television advertising, as well as expenses for public-relations firms, medals and plaques for agents, mailing lists and a wide range of other things.
Robert Hartwig, president of trade group Insurance Information Institute, said auto insurance "is the largest of all property-casualty insurance lines, accounting for more than one-third of all premiums written, and it accounts for a much higher proportion of the advertising dollar." He estimated more than half of all advertising in property casualty is associated with auto insurance.
Insurers keep close track of the effectiveness of their ads. Allstate, the third biggest spender at $745.3 million in 2011, noted in an internal presentation last October that it had lost ground during the year among consumers in terms of awareness of its television ads. The presentation also said that call volume at Allstate's call centers had fallen by 30% last July after the insurer cut back on direct-mail solicitations. In response, the company said it launched a new spending initiative designed to boost sales near the end of the year.
Television ads are at the heart of many of the carriers' media campaigns, though Internet advertising also is extensive, analysts said. Geico's Gecko campaign competes with State Farm's good-neighbor pitch, Allstate's series of "Mayhem" ads, and Progressive Corp.'s (>> The Progressive Corporation) perky saleswoman, Flo, among many other familiar campaigns.
In 2011, Geico was responsible for roughly one out of every six dollars spent on marketing in the property-and-casualty industry, SNL said. Geico's 10% increase in 2011 was below the industry growth rate of about 15%, according to SNL. Allstate's spending increased 12% and Progressive, ranked fifth, rose 9% to $536.1 million, according to SNL.
Progressive didn't respond to a request for comment.
Write to Leslie Scism at firstname.lastname@example.org and Erik Holm at email@example.com.