Insurance brands are well accustomed to storms. Helping customers protect themselves and the property they own during a disastrous event like a hurricane is part of their remit. However, there’s a new pressure system building in the property and casualty insurance category as a host of circumstances challenge brands to rethink the way they market themselves and the massive marketing budgets they command.

Climate change, bringing more extreme storms like the recent Hurricane Ian, for example, in parts of the U.S. has already been putting stress on brands. Now, these large companies, including Allstate, Progressive and State Farm, are also facing inflation and rising costs for claims, even as they attempt to court Gen Z. The next generation of customers thinks about insurance in wholly different ways than their parents and grandparents, forcing brands to reevaluate nearly everything about their marketing.

“You’ve got regular price inflation, you’ve got claims inflation, you’ve got consumers that are paying more for housing costs, food, fuel, gas in their cars, all of that stuff and you eat or pay your insurance—guess what, they’re not going to pay their insurance,” said Ellen Carney, principal analyst of application development and delivery at Forrester. “You’ve got billion-dollar marketing budgets and you want that marketing money to be paying off and it sure doesn’t sound like it is.”

Insurers are already making changes as they prepare for the future. Many brands have begun investing more in digital marketing and less in broadcast TV as they seek to better target customers. Some, like State Farm, are also experimenting with new marketing channels like the metaverse and gaming. Experts also say embedded insurance, a growing trend in which a non-insurance brand incorporates insurance services into the sale of an item, can represent both an opportunity and a challenge for existing insurance brands. Some automotive brands, such as Tesla, already offer insurance services, for example, and experts predict the practice will grow as younger consumers seek out convenience rather than brands. In most cases, traditional providers underwrite the insurance; Toyota, for instance, uses Toggle, part of Farmers Insurance.

“The brand that you’re going to remember is the retailer you went into or the car dealer—not the name of the insurance company until you have a claim,” said Carney. “This is a huge marketing problem of being an ingredient brand in the embedded insurance world.”

The next frontier

Along with younger customers, insurers are also thinking about embedded insurance as they plan for the future. Previously, the idea was limited to extra warrantees for a phone, or insurance around travel, but now the trend is growing in scope, experts say. Consumers are increasingly more receptive to buying insurance from a non-traditional player, according to a recent Insider Intelligence report.

Nationwide has been offering embedded auto insurance for years, Ramon Jones, chief marketing officer, said, noting existing experiences with Ford, Toyota and Rivian, the electric vehicle brand. As auto brands and property owners try to diversify into additional revenue streams by investing in embedded insurance, existing insurers might meet them there. That would shift the marketing to more of a business-to-business approach, possibly meaning less airtime for Flo, Mayhem and the gecko—although he is not an endangered species yet.

During the early days of the pandemic, many consumers stayed home and off the roads. In fact, in 2020, several insurers, including State Farm and Allstate, began offering refunds to customers as they tried to cement loyalty and stay in consumers’ good graces. Both brands even promoted the give-back programs with TV campaigns. Of course, now, such offers are far in the rearview mirror. Consumers are driving again and so the number of claims has risen. In addition, the supply chain disruptions of recent years have taken a toll—cars are more expensive to service and repair and the pricing of car parts, along with home improvement materials, have undergone drastic increases. Price hikes are slowly rolling out on a state-by-state basis.

CMO turnover

After years of defying the short average 40-month tenure of chief marketing officers, many insurance brands have new leaders at the marketing helm. Progressive named Remi Kent CMO last year, following the retirement of Jeff Charney, who was with the brand over a decade. Similarly, after marketing leader Ted Ward retired, Geico named Damon Burrell CMO this past spring. And State Farm recently announced Rand Harbert, who has helmed marketing since 2010 but has been with the brand since 1992, will retire at the end of the year and be replaced by Senior VP Kristyn Cook.

These executives are tasked with leading their brands through the economic turmoil at a time when marketing budgets may be tougher to justify to top executives, including CEOs. Experts say that in insurance, as with many other categories, the metrics used to measure success have changed beyond driving growth to include return on investment and customer retention.

“Insurance CMOs today need to have a much wider area of skills than they did in the past,” said Eleni Digalaki, principal analyst, fintech at Insider Intelligence. “It’s not just the creative and the storytelling side, it’s do you understand AI, performance analytics, can you do effective targeting?”

Signs of pullback

Already, amid the new pressure, marketing budgets of some of the largest insurance advertisers in the U.S. are beginning to shrink. Last year, State Farm spent $486.2 million on media, an 11.9% decline from 2020, according to Ad Age’s Datacenter. Progressive also saw media spend drop 3.5% last year to $826.5 million, while Geico, still a massive media spender with a budget of $1.5 billion, still saw media fall 1.8% last year, Datacenter reported. Earlier this month, Geico, which is owned by Berkshire Hathaway Inc., laid off a sizable portion of its marketing staff as it faces the challenge of maintaining its low rates—a cornerstone of Geico’s advertising proposition to consumers—amid record inflation. In Illinois, the brand’s auto insurance rates just rose 6%. Geico did not respond to a request for comment.

While Allstate’s marketing spending increased last year—the Northbrook, Illinois-based company spent $546.7 million, a 20% rise from 2020—the brand said it is currently struggling with huge losses following Hurricane Ian and inflation from auto insurance. Allstate, which did not return a call requesting comment, already announced it will report a third-quarter net loss of as much as $725 million, which sent its stock sliding 13% last week.

Yet while there is an overall pullback in spending, experts are predicting a bump in digital advertising this year as brands try to maximize their dollars by focusing on more effective targeting techniques. A recent report from Insider Intelligence forecasted a U.S. digital ad spend of $12.03 billion this year in the insurance category, a 15% rise over 2021. Though that growth is less robust than the 24.4% jump between 2020 and 2021, the firm still estimates more growth every year through at least 2024.

The shift in spending comes at the expense of TV, which had traditionally been insurers’ channel of choice as they sought to stay top-of-mind for consumers even before the need for coverage arose. Those ads for years have been filled with mascots, including Progressive's Flo, Allstate's Mayhem and the Geico gecko, which started the trend back in 1999. 

“Insurers have always relied on upper-funnel marketing to drive awareness,” said Digalaki, noting that TV is great for brand awareness campaigns with memorable taglines and characters like Allstate’s Mayhem and Liberty Mutual’s “Liberty, liberty, liberty” singsong. “Those campaigns drive awareness with taglines that stick in your head,” she added.

But digital can offer more bang for the buck when it comes to targeted marketing and reaching the consumers brands want to attract—and not reaching those they want to avoid. Experts say that insurers are pulling marketing for some customer segments, in riskier areas with more extreme weather events, for example, something more easily accomplished with ads on digital channels, including connected TV.

At Nationwide, the company is pursuing more “personalization at scale,” according to Jones, who was appointed CMO in late 2019.

“We're more focused on optimizing spend to drive intermediary recommendations, while continuing to prioritize brand awareness among customers,” he said. “This has resulted in a shift to more digital activations driven by media consumption trends and the ability to measure the efficiency of digital tactics.”

When it comes to investment, experts also expect insurers may think twice about technological innovations around claims systems for the future. That budget may be rerouted to assistance with customer service for example, such as digital chatbots, Carney said.

Some brands are also rethinking their messaging with the changing economic situation as a backdrop. Last month, State Farm rolled out a new “Personal Price Plan.” The offering was not a new tool or change to existing rates, but a repackaging of the company’s regular insurance product—a personalized quote based on individual situations. Yet the new phrasing “was created to clearly communicate that State Farm offers customers a personalized plan at an affordable price just for them,” said Alyson Griffin, VP of marketing. “When you think about some of the macro-economic trends we’re facing, it shouldn’t come as a surprise that personalization, especially in the form of affordability and service, matters to customers,” she added.

State Farm is also using one of its most popular marketing assets to connect with customers this Halloween. The company currently has a pumpkin carving template of spokesman Jake from State Farm available for download on its website. Griffin noted that Jake’s TikTok has also seen strong engagement—after nearly one year of existence, the account has more than 620,000 followers, she said.

Yet experts warn that brands will need to do more than just repurpose an existing TV campaign onto TikTok. Gen Z especially will expect something more clever, and this could mean rethinking creative messaging to better complement the new channel.

“It’s also about adjusting the messaging and changing the content to make it more interactive and more engaging, which is something that’s expected on TikTok,” Digalaki said. “You’re expected to show up more authentically and more simply.”

The Gen Z factor

Everything insurers are planning, however, will be with an eye toward younger millennial and Gen Z customers. Most of the latter are unreachable through traditional TV ads, so marketers have had to be more savvy about the channels they choose to invest in. Brands are looking at the metaverse, NFTs and gaming, along with more popular social channels such as TikTok. Last year, State Farm debuted an NFT treasure hunt as it tried to show up for younger consumers where they are spending their time. The Bloomington, Illinois-based insurer recently teamed up with iHeartMedia to bring State Farm into iHeartLand on both the Fortnite and Roblox gaming platforms.

“By creating experiences that players can engage with, we can not only add to the user experience, but also gain additional points of measurement to glean insights into what users are gravitating to, then take those learnings and build upon what’s working,” Griffin said. She added that “It’s important to understand and focus on how this demographic perceives your brand. You need to be authentic, clever and creative to be successful.”