All those ads trying to wheedle, cajole, convince and otherwise get drivers to switch car insurers add up to billions of dollars for insurance companies. But a new study says that even with all that financial heft, fewer drivers are deciding to take the plunge and go elsewhere. That sound you hear is money sliding down the drain.
Last year only around 9% of policyholders, about $12 billion worth of premiums, switched to another car insurer, say consultants at McKinsey & Co. (via the Wall Street Journal).
Apparently that’s quite a slide from the 12% who did so in 2009 and 2010, when people used comparison shopping to buy insurance that could save them a few bucks after the recession.
In order to lure new customers, marketing expenditures for insurers jumped 21% in 2010 to $5.1 billion before ticking up to $5.9 billion in 2011. The numbers for 2012 aren’t out yet but that dollar amount is expected to have risen yet again.
Geico spends the most, at $1 billion in marketing costs reported in 2011, followed by State Farm at $813.5 million and Allstate at $745.3 million.
Throwing all that firepower at drivers isn’t quite working, however, as the people who are usually the target of such advertising are quite price-sensitive and “is not as large or as valuable as the marketing firepower aimed at them would indicate,” the report said.
Only 27% shopped around in 2011 and then a third of those decided to switch insurance coverage from one business to another, while the rest stayed put and didn’t even take a peek elsewhere.
Things aren’t going to change anytime soon, say experts — the companies will continue to shell out dough to try and woo those stubborn customers. Even though “the industry as a whole is treading water; some carriers are spending heavily for brand recognition and have little to show for it” in market-share growth, McKinsey’s report said. Still, “this expensive battle for customer consideration isn’t going away.”
Bombarded by Ads, Few Drivers Switch Car Insurer [Wall Street Journal]