The Auto Insurance Advertising War

You can't avoid them -- the seemingly endless advertisements peddling auto insurance. Massive national carriers are spending billions collectively each year to gain top of mind awareness over their competition.

Who is winning this war? GEICO is winning the spending battle, forking out over $600 million a year to strengthen its brand. That kind of ad spending dwarfs even GEICO's primary competitors. State Farm is spending $385 million a year; Progressive is shelling out $323 million; and Allstate is spending $272 million a year to convince Americans we'd be in good hands by switching to them. Despite being out-spent by GEICO by nearly a two-to-one margin, State Farm continues to rank as the nation's largest auto insurer.

Why do auto insurers need to advertise so heavily? Two reasons: top of mind awareness; and unpredictable buyer behavior.

Top of mind awareness: This is the notion that consumers will purchase a product from a company that they can recall. Research has clearly shown the majority of auto insurance shoppers will select three to five carriers. Usually, those insurers will be the ones that come to mind the quickest. Therefore, insurance advertisers want to assure themselves a place atop the consumer's mind.

Unpredictable buyer behavior: This simply means it is very difficult to determine when a consumer will be in the market for auto insurance. Usually, the primary reason why a consumer shops for car insurance is due to a rate increase. Other factors that drive auto insurance buyers include: a move, a change in marital status, purchasing a new car, teen drivers and poor customer service. But, with the exception of a rate increase, it is nearly impossible for an insurer to know exactly when these other conditions will occur.  In addition, auto insurance is a large price tag item and the buying process is perceived as cumbersome by many consumers. There is a formula of sorts that advertisers and ad agencies use to determine the media buy frequency needed for a particular product. Expensive product + infrequent purchases = heavy ad spending. Inexpensive product + frequent purchases = light ad spending (i.e., bread or hamburger meat).

We thought it might be interesting to review what some of the major auto insurance players are doing in order to enhance or maintain their marketshare:

STATE FARM
State Farm launched its "magic jingle" campaign in 2010. The campaign is targeting younger drivers. As you no doubt have seen, the ads feature agents who magically appear when people recite the jingle.

(Quick -- who wrote the famous State Farm jingle way back in 1971? If you said Barry Manilow, you are correct.)

ALLSTATE
Allstate continues to use the baritone-voiced Dennis Haysbert as its voice-over guy, but the company has been featuring a new icon -- the "Mayhem" man -- in its more hip commercials. The campaign has not yet helped to stop the bleeding. Allstate has been losing marketshare on a fairly consistent basis.

GEICO
With the multiple campaigns that GEICO runs concurrently, the only consistent insurance-related benefit conveyed in all the advertisements is that "15 minutes can save you 15% or more on car insurance." At any one time GEICO has been known to run up to four separate campaigns at once (gecko, caveman, Rod Serling and money-eyes). But the strategy has paid major dividends. Over a decade, from 1999 to 2009, GEICO's U.S. marketshare more than doubled, and it has reached 8.29% through 2010.

PROGRESSIVE
After spending more than a decade searching for just the right ad campaign, Progressive struck gold with Flo, keeper of the Progressive store. Progressive's marketshare jumped from 4.7% in 1999 to 7.6% in 2010.

FARMERS
Farmers Insurance had been laying low for a couple decades. But the insurer's "We Are Farmers" campaign, where an insurance professor is schooling new agent recruits, is an attempt to get the giant insurer back in the mix. Farmers still has not made the big leagues in terms of its annual ad spending. The carrier is forking out around $50 million a year on its various ad campaigns.

ESURANCE
For a decade after it launched in 1999, Esurance positioned itself as an online auto insurance provider, appealing to a younger demographic through its cartoon-based advertisements. Esurance made a dramatic change last year when it introduced "The Saver" campaign, where real-life actors remind consumers they may either buy online or through a live agent. Although Esurance spent over $80 million in 2010, the company owns less than 1% of the nation's auto insurance marketshare.

NATIONWIDE
Nationwide has been spending about $50 million a year on its "Greatest Spokesperson in the World" ad campaign in an effort to improve its 4.5% U.S. marketshare. As you have read thus far, a $50 million campaign may seem substantial for most advertising categories, but it pales in comparison with the major auto insurance players.

AMERICAN FAMILY INSURANCE
American Family is the nation's 10th-ranked auto insurer by marketshare (2009 figures), with a 2.0% slice of the business. The carrier has been pushing its emergency roadside service in its advertising, and spends in the neighborhood of $7 million a year for its auto insurance products.

How would a relatively unknown auto insurance brand break through the massive clutter caused by these and other auto insurance advertisers? It's a safe bet that if any new players emerges it will have to come up with a unique strategy in order to set itself apart from these well-funded competitors.

Top 10 Car Insurance Companies by Market Share (2009)
State Farm Mutual 18.6%
Allstate 10.5%
Berkshire Hathaway Inc (GEICO) 8.2%
Progressive 7.5%
Zurich Financial Services (Farmers) 6.4%
Nationwide Mutual 4.5%
Liberty Mutual 4.4%
USAA Insurance 4.1%
Travelers 2.1%
American Family Mutual 2.0%