Why are there so many automobile insurance commercials?

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Listener Steve Arkowitz from Atascadero, Calif. asks:

Why are there so many car insurance ads on TV? There are far fewer ads for other types of insurance.

From Geico gecko to Progressive’s Flo, car insurance commercials are ubiquitous, making the characters as recognizable as celebrities.

No surprise when you look at corporate advertising budgets: Largest auto insurance company We spend billions of dollars on advertising each year. In 2021 alone, Geico spent over $2 billion. Progressive, $1.87 billion. Allstate Corp., $1.3 billion. State Farm Mutual Automobile Insurance and its affiliates have more than $1 billion, according to S&P Global Market Intelligence.

The high cost of TV advertising can be a barrier for companies selling other types of insurance. But big auto insurance companies make billions of dollars, so you can spend billions on it.

Auto Insurance Profit Soars

Geico Advertising started to spread in the 2000s, A character like an angry caveman, reality show When melodrama.

In 2005, Slate reported that motor vehicle accident rates declined along with insurance claims. to a “surge in profitability”. As a result, insurers are “spending more on advertising than ever before,” said Ted Ward, vice president of marketing at Geico.

A similar scenario played out early in the pandemic.As auto insurance claims decreased, auto insurance companies at least $29 billion by 2020, According to the Consumer Federation of America.

A big reason auto insurance companies see television advertising as valuable is because of the simple fact that most people who own a car need to have auto insurance, says the University of North Carolina at Chapel Hill Kenan. Marketing assistant professor Pranav Jindal explained. Flagler Business School.

in all US states minimum car insurance requirements, Except for New Hampshire and Virginia.

“So the market is big,” Jindal said.

Compare that to home insurance, he said. Many people live in rented homes instead of owning them.In addition, mortgage lenders are required to purchase home insurance, which Not required by law.

lots of competition

Another reason auto insurers think it’s worth spending a lot of money on advertising is because auto insurance pricing can fluctuate, making it easier for drivers to shop at lower rates, says Jindal. said Mr. “They can set prices based on risk, and different companies rate risk differently, so you see a lot of variation in prices,” Jindal said.

Factors such as frequency of driving, driving history, and age all the cost of your auto insurance. Also, companies may place different levels of importance on about some of those factors compared to competitors.

“This means that at any given time, if you look at quotes from two different companies, they can be very different quotes for the same policy or the same coverage,” said Jindal.

That’s why Geico advertises saving 15% or more on auto insurance, and companies say they save an average of $300 to $400, according to Jindal.

“Are people saving that much? No, not at all. But there may be some savings,” Jindal said. “So with that much savings, there is a huge incentive for auto insurers to advertise and let consumers know about the savings.”

For example, when his wife moved from India to the United States, Jindal said, some insurers quoted the two together at $2,000 to $4,000 over six months. (Immigrants usually pay higher rates because they don’t have a driving record. AutoInsurance.org,)

But one insurance company acknowledged that his wife had already been driving for 15 years and quoted him $600 to $700.

“Companies want to advertise because there are many, many variations of quotes. They want to let consumers know that it is beneficial to search,” says Jindal. says Mr.

Inflation means smaller advertising budgets

But there may be less advertising in the future — record inflation is impacting a wide range of industries, including auto insurance companies.

Geico, State Farm, and Progressive are reducing their spending each year. According to S&P Global Market Intelligence, Geico has cut its advertising budget by 4.4% between 2020 and 2021, while Ad Age recently reported The company “has made significant headcount cuts in its marketing department.”

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