Opportunities in Car Insurance

Actuaries are the stereotypical boring people. There's no glamor or flash associated with their work, which is one reason why car insurance seems like such a prosaic business. However, in the last few years, there has been an epic wave of advertising by car insurance companies.

I am amazed by how many different ad campaigns have been launched by just one company. GEICO has run ads featuring cavemen, talking geckos, money with eyes, random celebrities, and at least one other theme that I am not remembering at the moment. The cavemen ads were so popular that a TV show spun out of them.

The other car insurance companies have not been sitting idle. While their ads are generally not as good, they have plastered our TVs, radios, magazines with their own gimmicks and celebrity spokespeople. I have not done any formal analysis, but it feels like the car insurance industry advertises far more than other industries.

It's interesting to think about the causes of this behavior. Do insurance companies lack other ways to acquire customers? Are customers so profitable that the costs of so much advertising are outweighed by the benefits of acquiring customers? How readily do customers switch car insurance companies? Is the advertising onslaught needed because consumers need many nudges before they switch companies? Or, is it needed to retain existing customers because customers switch easily? Does this advertising blitz help more with customers getting insurance for the first time?

It's also interesting to think about the implications of this both for the insurance companies as well as for consumers.

Could car insurance companies increase referrals or other word of mouth approaches? Social media is very popular right now. Does it offer any interesting ways to let potential customers know about an insurance company? Should an insurance company try to get its name mentioned in the news for example, e.g. by publishing research or advice? How do car insurance companies know their advertising is working? More specifically, how does GEICO know which of its many campaigns is effective?

Some of the biggest implications for consumers come from realizing that the spending on advertising is not flowing to them. How does a consumer capture some of the value that is being spent on advertising? For example, should consumers ask for a policy with a longer term and ask the company to return to them the advertising money the company does not have to spend anymore? Does it make sense for consumers to pool together and join in bulk, again asking the company for a rebate on the advertising?

Of course just coping with the advertising has implications for consumers. How can consumers choose between the various options? Unless all the advertising cancels out, consumers need to worry about the advertising introducing a bias into their decisions. A good guide to choosing between the myriad of options could be important, especially to avoid mistakes due to framing. While some of the advertising is amusing, it can also be overwhelming. Are there ways of avoiding the advertising that are specific to car insurance?

None of the above ideas may be valuable, but every time I see another advertisement on TV, on the radio, or in my mail, I wonder if there is an opportunity in car insurance.