Insurance company GEICO has placed its media agency account in review, prompting questions about the stability of the insurance industry overall.
The incumbent on the GEICO business is Horizon Media, which has managed the account for 25 years.
According to agency research firm COMvergence GEICO spent an estimated $1.1 billion on measured media last year, including approximately $425 million earmarked for digital.
The review follows the appointment of a new CMO—Damon Burrell—at the company earlier this year.
According to an analysis by eMarketer’s Insider Intelligence, the review comes amid increasingly tough times for the insurance industry.
The market research firm notes that while the U.S. economy has steadily added jobs in recent months, industries impacted by inflation—insurance and finance among them—are going the opposite way. In August insurance and finance layoffs doubled to 23,000 from the previous month.
GEICO’s troubles are partly reflected in its Q2 results. The company, a unit of Berkshire Hathaway, reported a pretax loss of $487 million, versus a pretax profit of $626 million in the prior year period.
Part of the problem, per BH’s Q2 earnings report is “significant cost inflation in automobile markets,” which the company said began to accelerate in the second half of 2021. “Increases in used car prices are producing increased claims severities on total losses and shortages of car parts are contributing to increased claims severities on partial losses,” the company said. “In addition, injury claims severities continue to trend higher than general inflation rates.”
While it didn’t go into detail, BH reported that both GEICO’s advertising and employee related expenses were lower in both the second quarter and first half periods. That could spell trouble for the ad sector, eMarketer concludes. "Any cut from an insurer could leave a big hole in the ad industry--insurers are expected to make up 45% of total financial services ad spending in 2023."
And eMarketer reports a sharp deceleration of digital ad spending growth for the broader U.S. insurance category. In 2019 growth was nearly 30%. Fast-forward to 2022 and growth is forecast at 12.1%, dropping to 10.7% next year.
A GEICO rep didn’t return queries about its media review.