Geico Builds Its Auto Insurance Market With “Cheap” Products
Geico, owned by billionaire Warren Buffett’s company Berkshire Hathaway, is rapidly building its customer base by marketing “cheap” insurance products. Geico and Mr. Buffett pride themselves on being thrifty. Geico advertises its products assuming that car insurance customers want the cheapest premiums they can find – without mentioning the quality of coverage provided in return for its inexpensive insurance products.
Berkshire Hathaway spent $1.2 billion on advertising for Geico last year, making it the seventh largest advertiser in the country. Mr. Buffett told the Wall Street Journal, “I am perfectly willing to spend whatever it takes to get everyone in the country to check our price.” Buffet’s strategy is paying off, quite handily. Second quarter Geico pretax profits increased 17% over last year to $393 million. Geico has become a “cornerstone of Berkshire’s huge insurance operation.”
Yet while cheap insurance may make Geico customers happy when they pay their premiums, when they are in a car accident and need insurance to help make them whole, many customers and personal injury lawyers agree that Geico falls far short of one of the best auto insurance companies. Geico had 1825 consumer complaints at the Better Business Bureau in the past 3 years. Of these, 1175 complaints involved problems with Geico’s product or service. In May 2014, the Massachusetts Division of Insurance fined Geico $275,000 for inconsistencies in reporting car accident information to state agencies and policy holders. The Division found Geico had not properly notified MA car accident operators of its at fault determinations and of customers’ rights to appeal those determinations.
Car insurance customers would do well to shop for insurance based not just on price, but also on the quality of coverage and customer service they will receive when they are in a car accident.