GEICO spent far more than other property insurance companies on advertising in 2011, both on an absolute basis and as a percentage of the business the company wrote, according to a new study by Data provider SNL Financial. The study found GEICO had spent about $994 million on advertising in 2011. That was fully 22% more than next-largest spender State Farm, even though State Farm’s ad spending grew at nearly three times the rate GEICO’s did.
Every agent who has watched television even briefly knows the GEICO brand—talking British geckos, erudite cavemen, greasy-haired announcers with mock baritones, all of them essentially running gags used to get the company’s name to stick in peoples’ heads. Warren Buffett likes to say the Berkshire Hathaway unit can spend so aggressively because it keeps expenses low and can therefore advertise more to increase market share. The data showed, though, just how much more aggressive GEICO is willing to be.
SNL found that GEICO’s ad budget represented 6.5% of the premiums it wrote in 2011. Among the rest of the five largest auto insurers in the country, none spent more than 4.9% of premiums on ads. For the whole industry, in fact, the average is just 2.4%. Over the last 20 years, GEICO’s share of the market has roughly quadrupled, for which the advertising program usually gets much of the credit. Among U.S. auto insurers, GEICO has a market share of about 8.5%, third behind Allstate Corp’s 10.2% and State Farm’s 18.7%, according to the Insurance Information Institute.