Meet the Elephant in the Room With Flo, Mayhem and the Gecko

In a land where geckos walk upright, mayhem rules and Flo-bots are everywhere, an auto insurance startup is making a go of it with something a little less sexy: an elephant. That sounds good, but how to you build a brand from scratch in a category dominated by big-spending giants State Farm, Allstate, Geico, Progressive and Farmers? Together, these insurers control 52% of the U.S. market, according to data from SNL Financial cited by the Insurance Information Institute. That leaves dozens of smaller players to scrap over what's left or take share from the big five, which combined spent more than $1.4 billion on measured media plugging their auto insurance in 2011, according to Kantar Media. Although it's named for a massive mammal, Elephant is starting small in here, having launched in Virginia in 2009 before adding Maryland, Illinois and Texas. The parent company, U.K.-based Admiral Group, however, is big in its home country, where it operates multiple car-insurance brands, including Admiral, Bell, Diamond and Elephant. On a recent earnings call, Admiral CEO Henry Engelhardt summed up why the company would even take a shot in the U.S.: "In just these four states, we have now access to a vehicle population larger than the U.K." The trick, of course, is signing up some of those drivers. And the U.S. market presents hurdles not present in Europe. Elephant operates in the direct-to-consumer market, conducting business online or over the phone as opposed to with a traditional agent. This is a growing segment in the U.S., where 23% of shoppers now exclusively use web quotes, up from 15% in 2009, according to J.D. Power & Associates. But online purchases are far less common here than it is in the U.K., where some 75% of car insurance business is done online, according to Mr. Minkler. Moreover, web-buying patterns are different here. In Europe, shoppers frequently use aggregator websites where multiple quotes are obtained through a third party (think: Priceline for the U.S. travel industry). But aggregators have not taken off in the States. Why? "The insurers are not dummies," said Jeremy Bowler, senior director of the global insurance practice at J.D. Power. "They look at Europe, and they recognize that ... the aggregators have totally taken over." And that 's not a good thing for business, he noted, because aggregators have a vested interest in getting consumers to shop and switch carriers multiple times over. "Their role in the market has created phenomenal churn, which is destructive to profit for the insurers," he said, adding that companies make more money from tenured customers. As a result, the big U.S. insurers are spending mightily to lure drivers to their own websites and keep them there. This essentially creates a bigger barrier for newcomers and smaller players, which must either win business through the aggregators that do exist in the U.S., rely on independent agents or build their own brands in the crowded ad market. Elephant seems to be taking the last route. The company's latest TV ad features Tai, an elephant who appeared in the movie "Water for Elephants." In the spot, a man spots the pachyderm in his front yard. "It's just hanging out," he says. His wife replies, "Honey, it's auto insurance. It's supposed to be there when we need it," while the voice-over steers viewers to Elephant.com. The spot is by Barber Martin Agency in Richmond, Va., where Elephant is based. Still, Elephant is not interested in matching the ad spending of its big rivals or does it come anywhere close. The marketer spent a mere $3.35 million on measured media in 2011, according to Kantar Media. The big marketers have "almost created this expectation that you've got a have a flashy new ad every week, and that gets really expensive," Mr. Minkler said. "You've got to have a presence and it's got to be memorable on TV" but "there's a point at which it becomes overkill and it becomes about agencies trying to win awards or a company trying to say they've found the cool next character people will talk about."

Meet the Elephant in the Room With Flo, Mayhem and the Gecko

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