The personal lines insurance market (insurance sold to individuals, such as auto and homeowner) is fiercely competitive, as slow growth rates have forced carriers to poach customers from each other in order to gain market share, a difficult and expensive proposition. The leading carriers have shelled out billions in advertising dollars as part of their efforts. But what channels are insurers relying on to influence potential customers? A new report [download page] from MarketingCharts delves into the media weights employed by leading carriers and the strategies behind them.
As a whole, the property & casualty insurance sector spent almost $6 billion on advertising last year, according to figures compiled by SNL Financial LC. That represented 14.9% year-over-year growth, with the 10 biggest spenders accounting for roughly $4.6 billion, or 78% share of that total.
GEICO was once again the biggest spender, at almost $1 billion, though its growth in spending of 10.1% trailed the industry average. State Farm was next, upping spend by an impressive 29.2% to $813.5 million, and Allstate third at $745.3 million, up 11.8%.
When it comes to advertising dollars as a ratio of direct premium written, GEICO spent easily the most, at a whopping 6.5% (State Farm was at just 1.7%, and Allstate at 3.1%).
In 2011, 3 auto insurers cracked the top 10 brand advertisers on TV, according to Nielsen data. GEICO led at $415 million, followed by State Farm at $336 million, and Allstate at $239.5 million. Meanwhile, data from the Radio Advertising Bureau had http://www.marketingcharts.com/television/radio-revenues-inched-up-in-2011-21200/GEICO spending $172 million on radio in 2011, followed by Allstate at $137.7 million, and State Farm at $101.1 million.
Combining those figures results in an estimate (advertising dollars may be apportioned by insurance line of business) that finds GEICO allocating almost 60% of its total 2011 advertising budget to TV and radio alone. State Farm devoted roughly 54% to these two media, and Allstate 51%. In terms of TV dollars alone, GEICO spent an estimated 42% of its total advertising budget on advertising automobile insurance on this broadcast medium (everyone has seen the gecko ads…), State Farm about 41%, and Allstate about 32%.
Why does this matter? It’s not news to anyone, of course, that GEICO is spending big on TV. But the fact that GEICO is eating up market share (up from 7.6% to 9.1% in the last 4 years alone) suggests that its bet on TV is paying off. Why? GEICO’s bet makes sense when examined alongside its market share strategies and matters of consumer influence. (It’s worth noting that figures provided by WordStream exclusively for the MarketingCharts report estimate that GEICO is third in Google AdWords spending, far behind State Farm and Progressive. Other figures from Kantar Media, reported by Ad Age, don’t even put GEICO in the top 3 in AdWords spend. This suggests that GEICO is willing to put more of a premium of TV relative to online channels such as paid search, when compared to its competitors.)
GEICO’s stated target is the 20-29-year-old age group. Leaving aside questions of risk profile, this appears to be a solid strategy: as the MarketingCharts report reveals, a review of survey results from various research sources finds that these younger consumers are far more likely than their older counterparts to switch insurers. In other words, in a competitive market, these consumers are the most in play. Not only that, but in the past 5 years, Gen Y auto insurance customers have grown to represent 24% of all insurance buyers, double their share from 2007, according to J.D. Power & Associates.
But youth are watching less TV, correct? To some extent, that is true, but the decline is not extreme, and TV still represents the large majority of young people’s video consumption. More importantly, though, TV is the leading influencer of purchase decisions among advertising media. And, even more significantly, it has its greatest influence among young consumers, with that influence declining with age. That’s not only true for the general consumer, it’s also true for auto insurance customers, per survey results from Phoenix Research International.
All told then, GEICO is targeting the customer group most likely to switch carriers, by using the medium most likely to influence them. Is it a coincidence that GEICO has been increasing its market share? Perhaps. After all, advertising is just one piece of the equation. As the report outlines, website usability ratings, user-generated content, and the availability of multiple touchpoints are all influences in customers’ purchase decisions, among others. But at the least, GEICO’s heavy spending on TV appears to be a sound strategy. That may also be why State Farm, the leading auto insurer (that also devoted a heavy portion of its advertising dollars to TV), decided to make TV the centerpiece of a 2011 campaign focused on Millennials. While State Farm hasn’t been gaining in market share, it has managed to keep its leading share steady even as it works with an agent-based model in an age of disintermediation.
The 85-page report on personal lines insurance marketing from MarketingCharts contains 43 charts and graphs, and is an exhaustive compilation of primary and secondary research, including a host of new statistics provided exclusively by several research sources. The report delves into topics including:
The full report can be purchased here.