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Clever ads, pricing drive help Geico gain on rivals
CHICAGO — Geico, the fourth-largest auto insurer in the United States, just signed up its 8 millionth customer, continuing a growth rate that could push it ahead of rival Progressive Corp. in the next year. The Berkshire Hathaway unit, whose cavemen mascots even have their own television sitcom, still lags far behind larger rivals, but that is quickly changing as Chevy Chase, Md.-based Geico outsmarts competitors on advertising and pricing, said one analyst. “Ask 10 people whose advertising they remember best’’ of the largest auto insurers, said analyst Donald Light of Celent LLC. “It’s not Allstate, State Farm or Progressive.’’ At the end of 2006, State Farm Mutual Automobile Insurance Co. reported nearly 40 million auto insurance policies in force. Allstate Corp. reported 19.2 million at the end of the second quarter, and Progressive Corp. had 10.7 million at the end of September, the most recent figures available. The companies’ rankings in terms of premium market share are similar. But none of its larger rivals is growing as fast as Geico, which could put it ahead of Progressive sometime next year, according to an August estimate by Credit Suisse analyst Charles Gates, after the company put out its second-quarter earnings. The growth stems from Geico’s capable management, advertising spending, and what many consider its better business model, Gates wrote. Although Progressive pioneered “micro-segmentation,’’ or setting insurance prices individually according to each customer’s risk profile, Progressive has struggled to stay ahead, said Light. Geico has learned to mimic Progressive’s pricing acumen and outmaneuver it with more memorable advertising, he said. In its second-quarter earnings report, Geico said its policies in force rose 9.3 percent in the first half of the year, though it did not provide a number. Progressive reported 3 percent growth in personal lines policies in force through the first half of the year. Geico plans additional policy rate cuts throughout the second half of the year, a tactic many insurers are using to win business. Unlike its larger rivals, Geico sells its policies almost completely through direct-to-customer means, either by phone, Internet or direct mail. A Geico spokesman did not return a phone call for comment. E-mail this story | Print this story | Search archives | RSS Show comments |  Hide comments | Hide comments on all stories |
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