It's been a good year for Flo and the gecko. New research from J.D. Power has found that as auto insurance customers shopped around for coverage in 2020, Progressive and GEICO each captured a 30%-plus quote rate among active purchasers since July. That’s the highest rate of all auto insurers, according to a report in Insurance Journal.

Key Takeaways

  • Progressive and GEICO have had the highest percentages of new auto insurance rate quotes since July 2020, according to a J.D. Power survey.
  • Economic uncertainty tied to the pandemic has been driving consumers to shop insurers with a reputation for lower rates.
  • Policyholders are increasingly dissatisfied with their current auto insurers, in part because of a lack of awareness of the insurers' pandemic relief efforts.

Why Progressive and GEICO?

“When someone goes out and gets an insurance quote, they usually quote from two to three carriers at a time,” says Kyle Schmitt, vice president and global managing director for J.D. Power. These days, he adds, “They’re going to the carriers that are known for having lower rates, and they’re looking to Progressive and GEICO.”

That isn't surprising to industry experts, who watched both Progressive and GEICO run successful campaigns in 2019, snagging 85% of all new premium growth across the industry. Value-based messaging (perhaps more than Progressive's spokeswoman Flo or GEICO's talkative gecko) has hit a nerve, with 57% of insurance shoppers pointing to rates as the impetus for their comparison shopping this year. 

The coronavirus pandemic may have accelerated the trend. “It was a very stressful time—lots of people losing their jobs, and [lots of] financial uncertainty,” Schmitt says. “They have been impacted, and they’re looking for a better deal.” 

Consumer Satisfaction Overall is Falling

Although the auto insurance industry provided policyholders with an estimated $18 billion in refunds during the coronavirus crisis, consumer satisfaction levels are low—and getting lower. At the end of August 2020, only 56% of auto insurance customers described themselves as “very satisfied” with their current insurer—down from 68% in late March, according to a report in Insurance Business America. 

Part of the dissatisfaction may be due to policyholders' lack of awareness that many insurers instituted discounts at the start of the pandemic. Some 40% of consumers didn’t know that had occurred, J.D. Power found. 

Even 36% of independent insurance agents said they were unaware of their carriers’ pandemic-related efforts. As a consequence, only 42% of customers of independent agents say they were contacted to help manage their policy costs during the pandemic, compared with 52% of customers of direct companies, according to Insurance Journal. 

“For whatever reason, many [independent] agents just were not communicating with their clients on what was happening, versus the direct agents who just kept putting that message out harder and stronger, really into June,” Schmitt says. 

Low Acquisition Costs Also Give Insurers an Edge

As customers have shopped the auto insurance market due to economic stress and dissatisfaction with their current carriers, some insurers have been better positioned to take advantage. Carriers with lower acquisition costs, for instance, can more easily bring on new customers, and it takes them less time to make money from the added business. “They have lower overall expenses, so they are able to offer better rates,” Schmitt says. “GEICO and Progressive have an efficiency advantage.”

Additionally, GEICO and Progressive both have the ability to underwrite all segments of the market—nonstandard, standard, and preferred customers—while other companies may be able to underwrite only one or two segments. This gives them a larger addressable audience. Allstate and State Farm have both acquired other companies to expand their addressable markets in 2020. “But the question is, is it too late?” Schmitt asks. “GEICO and Progressive have already cemented that they can take all comers.”