Geico cuts marketing staff, puts media account in review

Geico has made sizable staff cuts in its marketing department, and put its massive media account in review after more than two decades, Ad Age has learned. Months after raising rates in Illinois and shuttering offices in California, and days after a unionization effort by employees, the Maryland-based insurer appears to be rethinking its marketing strategy under a new chief marketing officer. Along with the layoffs, the insurance brand—which spends more than $1 billion annually on media—has issued an RFP for its media business, according to multiple people close to the situation. It is unclear whether Horizon, which has worked with Geico for over 25 years, will be defending. According to multiple people close to the company, MediaLink is handling the review. Medialink declined to comment. Horizon referred comment to the client. The insurer has a new leader at the marketing helm. Geico hired Damon Burrell as chief marketing officer in April. Burrell is a marketing veteran who recently led Estee Lauder’s North American marketing team as CMO. In a company statement responding to an inquiry about the marketing layoffs, Geico said, "Like most large companies, we continue to review and adjust our staffing to respond to changing customer and business priorities." The company plans to offer associates positions in other departments when possible and will also provide severance benefits and outplacement services, it said. The company also said it has "not ended relationships with any of our media or marketing partner agencies." If the storied brand chooses a new partner, it would be a significant loss for Horizon, which also lost its U.S. business for Burger King, Popeyes, and Tim Hortons in April. The agency has also won some significant accounts this year including media duties for Kohl’s, Lionsgate, Slimfast, and Bluetriton. The agency has also recently launched Web3 and B2B practices. Geico's longtime creative agency is The Martin Agency. Recent reports show Geico facing multiple business challenges. Long known for its clever advertising in which a bright green gecko touts Geico’s super low rates and easy-to-use system, Geico is now having trouble maintaining such claims amid record inflation. In March, the brand, which is owned by Berkshire Hathaway Inc., raised its average auto insurance rates by 6% in Illinois—on top of a 6% increase the previous December. The company is battling the growing cost of replacing and repairing cars, according to its financial statements. “GEICO’s pre-tax underwriting loss in the first half of 2022 reflected increased claims severities, primarily due to significant cost inflation in automobile markets, which began to accelerate in the second half of 2021,” Geico parent Berkshire Hathaway recently wrote in regulatory filings, citing increases in used car prices leading to increased claims severities. Geico saw a 2% increase in premiums written in its second quarter of 2022 compared to the year-earlier period. In August, Geico closed 38 offices in California and stopped selling insurance via phone in the state, according to a report by Insurance Business America, which noted that hundreds of agents were affected by the decision. Geico is also facing unionization efforts by New York employees, the Guardian reported. Amid the recent news, Geico is facing more pressure in the heavily competitive insurance landscape. While State Farm still commands the most market share, growing rivals such as Progressive are challenging Geico. In 2020, the brand had a 6.4% share of direct premiums and Progressive had 5.7%, according to data compiled by the Insurance Information Institute. Last year, while Geico grew to 6.5% share, Progressive grew faster to 6.1%, for example. Ad Age Next: CMO Get your tickets for the Dec. 7 event in New York Register here Geico appears to be pulling back on its advertising spend, even as far back as 2021. That year, the brand spent $1.45 billion on media, a decline of 1.8% from 2020, according to Ad Age’s Datacenter. Geico parent Berkshire Hathaway ranks as the nation’s 15th-largest advertiser at $2.5 billion in total spending, according to the Datacenter. Insurance experts cite an industry-wide issue that will create lasting challenges for brands including Geico. “This is going to be very tough times for insurers,” wrote Ellen Carney, a principal analyst at Forrester, via email, citing higher premiums. Forrester recently predicted that insurance policy lapses for both auto and home and renters, will grow by 20%. Contributing: Judann Pollack, E.J. Schultz

Geico cuts marketing staff, puts media account in review

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