Why "Switch-and-Save" Marketing Isn't Sustainable for the Auto Insurance Industry

August 31, 2021

graphic of cars on crossing interstatesBellomy Market Research

In the past 20 years, the largest auto insurance carriers have taught consumers one thing: Comparison shopping can save you money.

Many carriers have spent big on advertising — almost $7 billion in 2019 — and many of those messages said, "People who switched (to us) saved money." This started as an attempt by carriers like GEICO and others to gain market share by increasing awareness of their lower prices. It didn't take long for other insurers to realize that they could also claim that switching to them saves money.

The impact of churn on the insurance market

Cost is one of the biggest decision drivers for customers across industries and services. Insurers have been incredibly successful at making consumers feel they can best control their insurance costs by comparison shopping. What insurers probably didn't expect was that their current customers would also hear this message — but they have, loud and clear. Over 30 million drivers are estimated to switch auto insurance companies annually.

The cost of cost-saving messaging

Across all industries, the cost of acquiring a new customer is five times the cost of retaining a customer; for insurance, it is nine times as expensive. As churn has increased over the past 20 years, insurers have also increased advertising in an attempt to maintain market share. At the same time, call center management, the technology associated with fielding customer inquiries, and the termination process have all become more expensive. These rising operational costs drive the need for increased advertising investment, creating a vicious spending cycle that results in higher consumer costs and additional churn.

The effects on market share

Currently, the top 10 insurance companies write about threequarters of automobile policies. Twenty years ago, the top 10 companies were writing less than half. Carriers that have positioned their brands as low-cost insurers have seen the most growth during this time. GEICO and Progressive, both known for "switch-and-save" messaging, have doubled their market share. However, companies that have strong brands based on customer service and trust are also growing. Brands like USAA and AMICA have also seen significant growth in market share.

How to stay competitive when you don't compete on price

Consistent messaging (whether about price, customer service, or trust) has helped insurers gain and retain customers, while carriers that try to straddle the line between price and trust seem to have lost share. With no compelling positioning, customers are increasingly likely to be drawn to another insurer.

The first step to building a strong identity includes brand auditing, message tracking, or customer experience monitoring to understand how customers are perceiving your agency and brand. Hearing the voice of your customers allows you to craft and use targeted messaging that not only supports your agency’s strength and image, but also resonates with your customers.

Don't get stuck in the middle

Consolidation is likely to continue. Regardless of market share, the best way to compete in the market is to understand how your members understand your agency brand. That positioning should drive every aspect of your brand and not just your marketing messaging. Refining, clarifying, and applying that lens to your customer interactions — whether digital, over the phone, or in-person — will strengthen your agency brand.

If you're not sure how you're perceived in your local marketplace or want to strengthen that image, you should consider doing some research with your current clients to to uncover that perception. Make sure those answers align with who you think you are, and ask if that’s the image you want to be presenting. How do you want to position yourself in the marketplace? Then cultivate your marketing efforts and messages to drive customer loyalty for the long run.

Cover of 2021 Issue 4 of Smart Choice Magazine, titled "The Marketing Issue: Weathering Any Storm"2021 Marketing Issue: Weather Any Storm

In this issue of Smart Choice Magazine, we’re providing advice from agency owners, Smart Choice State Directors, Content Marketing Experts, and more, to help you put together effective strategies to finish out 2021 strong. See why now is a great time to be an independent agent in this market and economy in the 2021 Issue 4 of Smart Choice Magazine.

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