Advertising Money Not Spent Well

Insurance companies are spending more and more on advertising that just isn’t working.

McKinsey Auto Insurance Buyer Survey

Insurance advertising is everywhere. You find advertisements on TV, all over the internet, on billboards, on the radio, and yes, even here on Car Insurance Guidebook. Well, our commercials are more for analytical purposes, but you still see them.

You would think with all of this insurance advertising saturation that the insurance companies would be making bank from these commercials, right?

Maybe not.

They Spend HOW MUCH on Advertising?!?!?!

That is exactly what popped in my head after I read the figures from a SNL Financial report, and I am pretty sure you will have the same reaction. In 2005, the top 5 property and casualty insurance companies spent around $2.5 billion dollars on advertising. Yes, that’s billion with a “b”!

But wait, in just 6 years that amount doubled to over $5 billion dollars being spent on advertising to you and me in 2011. Per the consulting firm McKinsey & Co., GEICO alone spends more on advertising than Nike, Coca-Cola, and McDonalds.

And you were wondering what they did with the insurance premium you pay every month.

All This Advertising Has to Be Worth it Right?

According to McKinsey Auto Insurance Buyer Survey these billions of dollars being spent on advertising to try and get drivers to switch companies does not seem to be working. Their survey included the responses of 16,000 people in June of 2012 and per the results only 9% actually switched insurance companies in 2011.

And what about the other 91% of the people surveyed?

• 18% did shop around, but ended up staying with their current company
• 18% renewed with a company they didn’t like, but didn’t want to go through the trouble of switching
• 55% were happy with their insurance company

Losing Advertising Focus

If you have read any of the insurance advertising commercials that I have reviewed, you will know that one of my biggest pet peeves is the “our rates are cheaper” advertising. It just felt that it was everywhere and that all of the companies were doing it. Well, apparently I was not wrong in my feelings about it being everywhere, because according to the McKinsey survey the majority of the insurance commercials over the last 10 years have been focused on price.

Unfortunately for the insurance companies, the segment of the population that will switch due to price is only around 30% of drivers. So for the last 10 years they have spent billions of dollars in advertising to get a small segment of drivers to switch; which surprisingly hasn’t been working (insert sarcastic tone here).

Guess it’s time to rethink those advertising strategies, huh?