Advertising is surely big business. So big that a whopping $311.6 billion was spent in the U.S. on advertising in 2015.
Insurance companies led the way in expenditure, beating other sectors of the economy by over 8%. Collectively, insurance companies spent about $6 billion on advertising in 2015. As anyone who has watched an evening of television knows, auto insurance saturates the air waves. Geico, State Farm, Allstate and Progressive collectively spent $3.7 billion on advertising in 2015. Geico, in 2013, led all competitors with $1.2 billion spent on advertising.
Numerous variables affect premiums, but coverage is always required by law and always pricey. Nerd Wallet, a consumer research and advice company, estimates the 2019 average yearly premium for all automobile policies is $1,621. Six percent of premiums paid to Geico in 2018 went to support the company’s advertising effort, led by the company mascot, an affable and easy-to-like gecko.
In addition to providing coverage and security, auto insurance companies, through their advertising agencies, have produced some clever television commercials. It’s hard to say anything negative about Geico’s gecko other than he appears on your monitor all too often. Surely you know Flo, played by actress Stephanie Courtney. Flo pitches Progressive’s auto insurance and exudes wholesomeness.
The purpose of developing these likable characters is to repeatedly associate the insurance carrier with a positive event or experience. After associating the wholesomeness of Flo a trillion times with the Progressive logo, our brains think Progressive is wholesome, too. It’s classical conditioning at work. Or we repeatedly find the patient, intelligent professor at Farmers University associated with Farmer’s Insurance. In time, our brains are conditioned to associate Farmers Insurance products with competence and stability. Allstate employs the deep, strong, authoritative voice of actor Dennis Dexter Haysbert seated in a rocking chair pitching his product in the middle of a busy intersection. You can be confident and reassured of All State’s stability and strength. Sounds like brainwashing or covert mental manipulation by insurance companies. Yes, of course.
UCLA Assistant Professor of Marketing Elisabeth Honka has shown that the main benefit of these auto insurance television ads is increasing brand awareness by the public. Beyond that, these television commercials do not influence choice of a specific brand or increase volume of sales.
To fully partake in the American experience, the automobile is necessary in most locales. Insurance companies surely benefit from laws in every state which mandate that drivers carry insurance on their vehicle(s). This mandate creates a giant pool of drivers seeking auto insurance, which enormously aids insurance companies to sell product. As a result, auto insurance is not a free market service.
The cost of insurance is most burdensome, of course, on drivers with limited financial means. The working poor and lower middle class drivers are most affected. The expense of insurance is too much for some. The Insurance Research Council indicates that nationally 13.0% of drivers are uninsured. There is significant variance among states with Maine having 4.5% uninsured and Florida 26.7%. In Utah, 8.2% of licensed drivers are uninsured.
Auto insurance premiums need to be driven down. The most obvious method is to wave goodbye to cute but expensive ads on television. Yes, it’s time to give Gecko the heave ho! Exiling the mascot could lower premiums for Geico’s product by 6%, a significant relief for many. We truly would be in “good hands” if insurance companies as “good neighbors” cut premiums by eliminating their amusing but largely uninformative television ads.
Should auto insurance moguls choose not to reduce television advertising, it is recommended that current feel good ads be replaced with information-oriented commercials that inform the public about services available, benefits, risks and costs. In this way, the consumer will be armed with important information to aid decision making concerning the purchase of auto insurance.
John Seaman
John Seaman, Ph.D. is a retired school psychologist and a retired adjunct professor of psychology at Salt Lake Community College.