financial services

Recession Fuels Auto Insurance Direct Marketing

mailboxOlder cars, more uninsured motorists and rate increases are prompting insurers to take a direct approach in communicating with consumers, according to Mintel Comperemedia.

Even as advertising and marketing budgets shrink across the board, auto insurers continue to send out a steady stream of marketing direct mail offers. Nearly 3 billion auto insurance direct mail offers were delivered to American mailboxes from April through December 2008, according to Mintel. This is nearly the same amount that was sent one year prior, despite drastic changes in the economy.

GEICO was the top mailer of auto insurance offers, sending nearly one-third of those tracked. State Farm followed with 16% of total mailings, while Liberty Mutual, The Hartford and Allstate took the third, fourth and fifth spots, respectively. Together, these five mailers accounted for 70% of auto insurance direct mail tracked by Mintel.



The past two years' mail volume represents a high for the auto insurance industry. Five years ago, auto insurers sent less than half as many offers, according to Mintel.

"The recession brings new challenges, like rising repair costs and more uninsured motorists, to the auto insurance industry," says Daniel Hayes, vice president of insurance services for Chicago-based Mintel Comperemedia. "Insurers realize higher rates won't bode well with cash-strapped consumers, so they're using direct mail to communicate policy changes with drivers."

Rate increases are necessary for auto insurers to remain profitable, Hayes says. Annual direct written premium (DWP) for private passenger auto insurance -- which grew around 8% annually in the early 2000s -- has fallen flat in recent years. In 2007, for the first time since 1993, annual DWP fell by 0.4%. Add to that people cutting collision coverage and increasing deductibles to save money, and there's a definite need for insurers to boost revenue.

"Despite proposed rate increases, auto insurers still focus on finding savings for individual drivers," Hayes says. "The top three themes I see in auto insurance direct mailings are saving over competitors' rates, accident forgiveness and rewards for safe driving."

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