GEICO : Everything you need to know – Insurance Business
GEICO: Everything you need to know
- Headquarters address: 5260 Western Avenue, Chevy Chase, Maryland 20815
- GWP: $35.09 billion (annual earned premium in 2020)
- Size (employees): 40,000+
- Global locations: US, Belgium, Germany, Italy, Spain, United Kingdom
- Underwriting expertise: Auto insurance
- Key people: Todd Combs, President and CEO
Pros
- The number of complaints against GEICO are much lower than expected for an insurance company of its scope and size.
- It offers numerous discounts on products and services.
- The firm has a robust mobile app and online platform.
- Has one of the lowest overall average premiums in the US
Cons
- GEICO does not offer gap insurance.
- Claims processing can be inconsistent.
- It has the highest rates for drivers with a DUI.
- Has a limited network of local agents and some coverage types are available only through partners
Common coverage types
Coverage Type
What it pays for
Liability Coverages
Damages for death or physical injuries resulting from an accident where the policyholder is at fault, or damages to someone else’s property from an accident where the policyholder is at fault
Uninsured Motorist Coverages
May help compensate the policyholder for injuries or property damaged caused by a driver without insurance or insufficient coverage
Medical Coverages
May help compensate medical expenses related to a car accident or for loss of wages, medical treatment, and other accident-related costs regardless of who caused the accident
Vehicle Coverages
May pay for collision damages or other damages resulting from vandalism, theft, fire, flood, or other covered losses
Others
GEICO also offers insurance coverages for mechanical breakdowns, rental reimbursement, and emergency road service.
GEICO’s auto insurance discounts
- Vehicle Equipment Discount – potentially save up to 23% on air bags, anti-theft systems, and other car features
- Driving History & Habits – can save up to 22% for drivers who are accident-free for five years
- Federal Employee (Eagle) and Military discount of up to 12%
- Multi-Policy and Multi-Vehicle discounts for loyal customers
2020 JD Power Study Rating
867 out of 1,000 points (highest-ranking among large auto insurers in the US)
Other insurance from GEICO
Homeowners’ and condo insurance, commercial auto, boat, recreational vehicle (RV), ATV, and renters’ insurance
Cost to insure most popular cars
Average annual cost in 2020 according to The Zebra
1. Ford F-Series: $417
2. Chevrolet Silverado: $509
3. Ram Pickup: $,1508
4. Toyota RAV4: $1,194
5. Honda CRV: $1,142
6. Toyota Camry: $1,409
7. Honda Civic: $1,455
8. Toyota Corolla: $1,319
9. GMC Sierra $528
10. Chevrolet Equinox $1,270
Car insurance rates by age
2021 average rates according to US News
25-year-old female: $1,228
25-year-old male: $1,185
35-year-old female: $1,060
35-year-old male: $1,084
60-year-old female: $1,004
60-year-old male: $1,036
Car insurance rates by driving record
2021 average rates according to US News
$1,100 for clients with a clean driving record
$1,395 for drivers with one speeding violation
$1,735 for those with one accident, and
$2,836 for those with one DUI
About
1. General Background
Whether you know it through the gecko or the caveman, GEICO is one of the most well-branded insurance firms in the US. The Maryland-based firm is a wholly-owned subsidiary of Berkshire Hathaway and provides coverage for more than 28 million vehicles owned by more than 17 million policyholders. It’s an insurance force to be reckoned with.
What product lines does GEICO cover?
Private passenger auto insurance is GEICO’s most popular offering. Beyond private passenger auto insurance, GEICO also provides: motorcycle, ATV, RV, and boat insurance; homeowners’, renters’, condo, co-op, and mobile home insurance; personal umbrella protection; life insurance; flood insurance; overseas insurance; business owners’; professional liability insurance; general liability insurance; commercial auto insurance; collector car insurance; identity protection; and jewelry insurance.
GEICO at a glance – 2021
- GEICO insures more than 28 million vehicles and has more than 17 million auto policies in force
- It’s the second largest private passenger auto insurer in the US
- The firm employs more than 40,000 associates and maintains 17 major offices across the country
- GEICO enjoys high ratings from A. M. Best, Moody’s and Standard and Poor’s for financial strength and claims-paying ability
2. History
GEICO was founded in 1936 by husband and wife team Leo and Lillian Goodwin, who were brave enough to set up a new company at the height of the Great Depression. The company was established as the Government Employees Insurance Company, with an initial client target of federal employees and certain categories of enlisted military officers. Within a year, GEICO had written 3,700 policies and hired 12 staff members.
In 1948, Benjamin Graham, a business professor at Columbia University in New York, chose to invest in GEICO. This was a pivotal moment in the firm’s history as Graham would later teach a young Warren Buffet at Columbia and therefore establish the famous link between GEICO and Buffet. In 1951, Buffet visited Washington to learn more about GEICO and had an impromptu meeting with Lorimer Davidson, an investment banker and good friend of the Goodwins. After this meeting, Buffet decided to buy some GEICO stock – and the rest is history.
When Goodwin retired in 1958, Davidson was named his successor. He went on to lead the company through 20 years of steady growth, reaching the one million policyholder mark in 1964 and generating insurance premiums of $150 million in 1965. Growth slowed down in the 1970s and years of aggressive expansion were starting to take a toll on the company’s loss reserves.
GEICO responded by exercising prudent underwriting – a move that triggered the second Warren Buffet appearance, when he reportedly purchased $1 million shares in GEICO stock in 1976. In the 1980s, GEICO introduced a 24-hour a day, 365-day a year telephone service for claims, sales and service. This customer-centric model remains with the firm today.
Buffet’s Berkshire makes the bid
In the early 1990s, GEICO went from strength to strength under the leadership of new chairman, president and CEO Olza “Tony” Nicely. Warren Buffet’s Berkshire Hathaway investment firm made a bid for the shares of GEICO’s remaining stock in 1995, and by 1996 GEICO became a Berkshire Hathaway subsidiary.
3. Distribution channels
Does GEICO use independent agents to distribute its products?
The GEICO website states: “GEICO never sells its products through insurance brokerages or independent agencies. GEICO Local Agents are exclusive agents for GEICO and partner companies and are not allowed to represent other insurance companies that compete with GEICO and partner companies in any way. GEICO Local Agents are permitted, with prior approval by GEICO, to sell insurance not offered by GEICO and partner companies.
“GEICO Local Agents are entrepreneurs who go into business to represent GEICO and property partners exclusively. Their primary role is to prospect and generate insurance leads and policies that GEICO would otherwise not capture.”
GEICO Mobile
The GEICO Mobile app was created to provide GEICO consumers with easy access to their car insurance information. It provides immediate access to digital ID cards, roadside assistance, and a virtual assistant who can answer questions related to coverage, billing, and more.
4. What customers are saying
Owned by Berkshire Hathaway, GEICO is the second largest auto insurance company in the world. It has a market share of 13.6% in 2020, according to the National Association of Insurance Commissioners (NAIC).
In a recent J.D. Power study on customer satisfaction, GEICO ranked among the top large auto insurers in the country based on product variety, prices, ease of application, and its online platform. J.D. Power also noted that price continued to be a bigger factor than the purchase experience during the COVID-19 pandemic. GEICO performed well in this aspect, but it was rated below average in terms of claims satisfaction.
On average, GEICO scored 4.0 to 4.5 out of 5 stars on various comparison and customer review websites. In particular, Forbes advisor gave it a four-star rating pointing out its superior rates for drivers with poor credit and low level of insurance complaints. However, GEICO’s products are not well-regarded by collision repair professionals and it charges much higher rates for drivers with a DUI conviction.