Auto insurance companies cut their advertising budgets by nearly 18% in the first half of 2022, compared to the same period in 2021, credit rating agency AM Top Reported.
Citing figures from UK-based data analytics firm Kantar, the agency reported that auto insurers spent a total of $1.4 billion on advertising in the first half of the year, compared to $1.7 billion the year before. That follows a year-over-year increase from $2.9 billion to $3.1 billion between 2020 and 2021.
The report, published in Review of BestoThe company’s monthly insurance magazine focuses on three airlines — Liberty Mutual, Allstate and GEICO — that have reported cutting back on advertising due to net losses in their auto business.
Most major airlines are pushing for rate increases in response to higher used car values and inflation in parts and labor costs. For example, Allstate said it has implemented 72 fare increases averaging about 10.3% at 51 locations since the beginning of 2022. Allstate and GEICO will each take nearly $200 million in additional premium nationwide as a result of the auto insurance rate hikes implemented in April, according to an analysis by S&P Global Market Intelligence.
At the same time, Insider Intelligence from EMarketer reports that “[t]The problems of the advertising industry and the fear of a recession” are driving insurers to “cut budgets and rethink their marketing strategies”.
“These are tough times for insurers – while the US economy has steadily added jobs in recent months, sectors hit hard by inflation, such as insurance, finance and advertising, have moved in the opposite direction. In August, layoffs in insurance and finance doubled from 12,000 in July to 23,000,” said Insider Intelligence.
In the first six months of 2022, Allstate spent $264.5 million on advertising, compared to $309.6 million in the same period last year, the report said. That is a decrease of 17%. In contrast, the company increased its full-year spending between 2020 and 2021, from $325.2 million to $521.4 million.
In the second quarter, Allstate reported a net loss of $1.04 billion for common shareholders, a year after the company posted a net profit of $1.6 billion, AM Best said.
Glenn Shapiro, Allstate’s president of ownership, said in a recent earnings call that the carrier is looking at which markets are profitable and encouraging its agents to operate in those markets, AM Best said.
Tom Wilson, CEO of Allstate, said at the Barclays Global Financial Services Conference in September that introducing underwriting restrictions in underperforming markets is one step the airline is taking to become profitable.
In addition to rate promotions, Allstate is implementing more restrictive new business underwriting measures in places where it cannot achieve adequate rates. An example of this is California, where the Department of Insurance (CDI) has not taken action against an increasing number of rate applications.
Liberty Mutual spent $202.3 million on advertising in the first half of 2022, compared to $219.2 million in the same period last year, AM Best said, down 7.7%.
The company posted an attributable net loss of $343 million in the second quarter of 2022 compared to a net profit of $769 million in the same period in 2021.
The report noted that in an earnings call, Timothy Sweeney, Liberty Mutual’s president and new chief executive officer, said the company is still “chasing the losing trend with course” in some rules, especially personal cars.
Jim MacPhee, the airline’s president of the airline’s global retail markets, said during the same conversation that Liberty Mutual is working with regulators as it deals with a “multiple of headwinds,” including inflation, car severity and weather losses.
The biggest cut was made by Berkshire Hathaway’s GEICO, which cut its ad spend by 40.7%, from $539.4 million in the first half of 2021 to $319.9 million in the same period of 2022.
For the second quarter, GEICO saw its $626 million profit in 2021 turn into a pretax loss of $487 million in 2022, AM Best reported.
Advertising Time Magazine reported earlier this month that GEICO had made significant cuts in its advertising department and would review its “mass media account” at Horizon Media.
“Months after raising rates in Illinois and formwork offices in Californiaand days after an employee union effort, the Maryland-based insurer appears to be rethinking its marketing strategy under a new chief marketing officer,” Ad Age said.
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