Does Auto Insurance Advertising Hurt Your Choices?

The amount of auto insurance advertising is mind-boggling. Some insurance companies are spending big money to get their message out. In fact, GEICO will spend over $1B to influence you to buy their auto insurance, and Allstate (including Esurance), will spend over $800M. Progressive will easily spend over $500M to put Flo in front of potential consumers.

Insurance companies are making significant investments to convince you to buy their product. They’re darn good at it too. Are they working? Maybe, that GEICO gecko is pretty recognizable.

The advertisers are doing their part, they’re letting us know about their brands, but hardly any of it helps you understand what the brands stand for. It may talk about making buying auto insurance online convenient, but not what they really offer. This then begs the question, does any of it help the consumer buy better auto insurance?

Why so much auto insurance advertising?

Well, the obvious answer is that auto insurance companies are trying to influence you to buy their auto insurance. That’s pretty easy. In fact, auto insurance is the single largest insurance segment in the United States, with premiums estimated at over $160B annually. It is one of the largest business categories in our economy. That makes it a competitive market, and big players are willing to invest big dollars to win new customers.

Another reason for the proliferation of auto insurance advertising is the rise in the popularity of online auto insurance sales. The direct-to-consumer companies like GEICO, Progressive, and 21st Century are the ones really driving the spending.

These companies don’t have insurance agents who represent or advocate for them, so the only way to get known is to advertise. Back when we all purchased our auto insurance through a local insurance agent, the advertising was less necessary.

Is auto insurance advertising on the rise?

In the mid-1990 in conjunction with the growth in online commerce, there has been an increased push to try to sell auto insurance direct to the consumer. There is a perception that bypassing the insurance agent makes buying easier.

It’s a distribution strategy used in most marketing segments. By eliminating the cost of a sales force a company can reduce new customer acquisition expenses. Like other sales forces, insurance agents get paid commissions. If the insurance company can eliminate commissions, it can achieve greater profits in the long term.

Without insurance agents, direct-to-consumer companies had to advertise to be found. This change radically altered the auto insurance advertising landscape, even insurance companies that sell through insurance agents are now compelled to advertise.

Are companies that advertise better?

There are many very good auto insurance companies with great ratings and services, but they are relatively unknown. They either don’t advertise or have much smaller budgets for advertising compared to the direct carriers because they still pay agent commissions. Other carriers like The Hartford, Berkshire Hathway GUARD, CHUBB, and Safeco are equally excellent. Auto insurance advertising is not a proxy for being a good insurance company.

The insurance companies who don’t advertise as vigorously are just as good, and maybe better, than those that do. For instance, Travelers insurance is one of the oldest insurance companies, the inventor of auto insurance, and the insurance carrier of choice for NASA’s space shuttle. Travelers is also the largest business insurance carrier in the United States.

Advertising is really limiting choice 

If consumers are only aware of a small number of insurance companies, the result is a perceived lack of choice. However, there are still a large number of quality auto insurance companies to choose from. What’s needed is a better way to inform the consumer.

There are a few places where you can still explore your choices. One way is by using online quote aggregators, like ComparisonQuote.com, The Zebra, and Compare.com, but if you use one of these sites you need to understand how to use online comparison quotes. Make the wrong choice and you might get the wrong coverage or company.

You can do things on your own, call several captive agents to compare Allstate, State Farm, Nationwide, or American Family. But that can be time-consuming.

Lastly, you can use an independent insurance agent. Independent insurance agents are the inventors of the comparison insurance quote. They are allowed to contract with many different insurance carriers, like Travelers, Hartford, CSE, Safeco, and Berkshire Hathaway GUARD. They can offer you a choice and consultation.

I’ll just Google it

In some ways, search engines also restrict your choices. Search engine algorithms appear to like large brands. If not, large brands have greater resources to secure the type of web authority needed to get found in search results. In fact, a simple search for “car insurance quote” likely brings up many of the same carriers that advertise on television, while the local search shows you a bunch of State Farm and Farmers agents.

The results may look broad, but if you study it, you may only have the choice to shop with 3-4 insurance carriers.

Search engine marketing for broadly searched terms like “car insurance quote” or “auto insurance” is expensive, the bids are driven up by the big spenders. In fact, an online auto insurance ad can cost between $32.00 – $52.00 per click. This is well beyond the budget of your local insurance agent and again favors the larger advertisers.

The bottom line

When you shop you do want convenience, but you also need choice. It’s not really shopping if you don’t have a choice, is it? All this auto insurance advertising has the effect of convincing consumers that there are limited choices.

Our recommendation, start with an independent insurance agent. If you don’t know one, contact us, or you can start a quote online.