Now, industry titans that historically focused on genteel relationship messages such as "Like a good neighbor" and "You're in good hands" are being goaded into a heated marketing battle that-with only a 1.5% rise in premium costs expected this year-threatens to boil over into a price war. "The market is becoming increasingly competitive once again," said Robert Hartwig, senior VP-chief economist of the Insurance Information Institute. "It's an offensive market."
But while Allstate is now mentioning price in its advertising, this is more than a battle of the numbers. It's a battle of the business model, pitting the call-center row of headset-wearing operators taking claims and signing on new customers against neighborhood agents who know a customer's kids and may even be a neighbor. It's pitting Internet price quotes vs. in-office consultations and the yearly search for a best price vs. a lifetime relationship with an agent.
Even though State Farm and Allstate enjoy massive leads, growth isn't on their side. "The direct model is the fastest growing side of the business," said Paul Newsome, an industry analyst with A.G. Edwards. The winner, he said, will be "the insurer that gives consumers not just price, but the easiest process for getting insurance."
State Farm, Allstate and Nationwide maintain vast networks of "career agents." Geico relies almost solely on direct-to-consumer appeals, exploiting the Internet and its longstanding call-to-action promotion, i.e. "15 minutes could save you 15% or more."
Paramount to consumers "is how much [they] pay. That's what our research has shown," said Ted Ward, VP-marketing at Geico, once an unknown niche player resurrected from the ashes of bankruptcy by Warren Buffet in the late `70s. "I like to think that is why we are causing so much discomfort to our competitors." Geico is handled by the Martin Agency, Richmond, Va.
By late last year Geico and Progressive had forced the once unthinkable-an Allstate commercial strictly about price. "We have never gone into price territory before, we've hung back," admitted Lisa Cochran, VP-integrated marketing and communications at Allstate.
The insurer integrated a direct price message into the Dennis Haysbert "Our Stand" campaign, launched in November 2003, and, Ms. Cochran said, more than half of this year's TV spots and print ads contains a price message. That's a marked change in strategy for its advertising, handled by Publicis Groupe's Leo Burnett, Chicago.
not changing course
Don't expect State Farm to follow suit, though. With an almost $14 billion lead on Allstate and a 63-year run as No. 1, State Farm is not changing course. When you pitch price, you relegate the brand to a commodity, said Mark Gibson, assistant VP-advertising. "The State Farm agent is the brand differentiator for us. Our brand stands for something much bigger than price."
State Farm's latest campaign, from Omnicom Group's DDB Worldwide, launched during the World Series last year and focuses on quirky claims, such as a wife running over her husband's foot after a goodbye kiss in the driveway and a teenage driver's two fender benders within 45 minutes of getting a license. The "True Story" campaign includes actual agents instead of actors.
The campaign's most oft-repeated line, "any insurance company can promise you a good price, but no one takes care of you like State Farm," isn't exactly bowing to price pressure. Out of the eight spots in the campaign, only one deals directly with price. In "True Discounts," State Farm touts the $356 in average savings its customers received last year for insuring an additional car, carrying a homeowner's policy or even a good-grades discount offered to teenagers.
There's a reason why the upstarts are scrappier. For the State Farm, Allstate and Nationwide brands, there's always much more than car insurance on the table, and cross-selling homeowners or life insurance is second nature for agents. But for Geico and Progressive, auto insurance is both business and brand.
Although reliant on independent agents for 70% of its business, Progressive's fastest growth engine remains direct-to-consumer marketing, which generates $3 billion of its annual business.
Progressive, however, isn't ignoring the independent. Last November, the Cleveland-based insurer launched an entirely new brand-Drive Insurance-with a series of humor-driven spots from Grey Worldwide, New York, featuring second-tier celebrities bragging about the so-called special treatment they were getting from their independent insurance agent.
"Our hope is the message resonates with those people who are disinclined to purchase insurance online," said Dave Skove, general manager of Drive Brand development at Progressive. "This is for the person who wants to look in the whites of the eyes of someone before they buy insurance."
The campaign "brands" the independent agent channel and, yes, sells the relationship customers can have with agents, even if they aren't Progressive agents. Mr. Skove said research showed 78% of consumers didn't know Progressive insurance was also sold through independent agents.
"Everyone is watching this," said A.G. Edwards' Mr. Newsome. "The reactions range from `maybe it will work' to `no freaking way.' This is new territory. No one has really tried to do a real big advertising drive with independent agents," he said. "Independent agents typically brand themselves with their own name."
All the activity adds up to a boon for the media. All four of the top insurers increased spending dramatically in 2004, State Farm by 220%, from $25 million to $81 million, according to TNS Media Intelligence (see chart), and are planning to keep up the pace.
Yet all the spending could be for naught, according to Kelly Nash, an industry analyst with Cleveland-based KeyBanc Capital Markets. "You've got all these companies advertising more than ever and there is a lot of noise," she said. "It will be interesting to see if all this noise will get consumers to shop around or whether it's too much noise and they won't shop around because rates are relatively stable because of all the competition."