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Why are there so many auto insurance commercials?

Here's what you need to know...

  • States regulate the auto insurance industry to keep the marketplace as competitive as possible
  • Even though the marketplace is competitive, rates and other terms and conditions of insurance are highly regulated by the Department of Insurance to protect consumer rights
  • To get a bigger share of the marketplace, insurance companies use a long list of different marketing tactics
  • While print and Internet marketing are popular methods in a company’s marketing mix, television commercials are a popular way to expand reach to consumers in a specific area or in a specific demographic
  • While you’re comparing premiums, it’s important to check out the rates with several companies because they each file their own rates to target a different niche

Auto insurance companies are constantly battling competitors to earn a large piece of the market share pie. Since insurance consumers are constantly shopping around to find the next best deal, it’s the insurers job to keep their brand in the public eye. To do this, the top players in the industry are shelling out billions in marketing dollars. Compare car insurance rates now by using our FREE tool above!

According to statistics released by JD Power and Associates, the leading carriers in a battle to earn market share are spending more than $5.7 billion on annual marketing campaigns. As you’ll notice when you compare premiums, these budgets are spent on a mix of different tactics on platforms like social media, TV, print, email and more. Why is so much of the focus on TV commercials?

Understanding How the Insurance Industry is Regulated

As with any type of financial industry, the insurance industry is one that requires a lot of regulation. When the McCarran-Ferguson Act was passed back in 1945, the responsibility for regulating the industry was passed from the hands of the Federal government to the hands of state officials. This decision was made for the sake of public interest.

There are several benefits to having states regulate insurance, because not only does it keep the costs lower, it also ensures that there is greater competition for insurers of all size within the state limits.

Here are some of the ways that the State Department of Insurance will regulate what goes on in the insurance industry:

  • Maintaining insurer solvency to prevent bankruptcy
  • Protecting consumers against bad faith tactics
  • Regulating premiums to prevent predatory rate filings
  • Helping high-risk drivers get access to insurance

How do insurance companies compete for business in the state?states with no fault insurance

It wouldn’t really be a competitive market if every insurer in the industry charged the same premium. That’s why it’s up to the insurer to charge an affordable rate that attracts vehicle owners. Insurance companies set their own unique rates but must also get approval for their rates by filing them with their Department of Insurance.

Before the company is able to file rates they must put a focus on rate making. Rate making is all about assessing the marketplace, projecting risk, budgeting for operational expenses, and allotting money to be put in reserves. After rates are made, the company can decide which demographic to target and which one to avoid.

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How do insurance companies price themselves out of some markets?

Marketing is a business practice that’s all about targeting a specific demographic. Companies that are calculating their base rates and coming up with a future business plan need to decide which market demographic that they want to insure. It’s very difficult for a company to be profitable in high-risk, standard and top-tier markets.

During rate making, companies will decide which markets are the most profitable as far as projections are concerned.

When doing this, companies will focus on a category of the market. They will then keep rates higher than the competition for the less desirable niche and more competitive for the desirable one. It’s not easy for a company to be priced best in all categories.

The Battle for Market Share

Market share is defined as the percentage of the total sales that are earned by a specific carrier in a single industry over a period of time. In the insurance marketplace, market share increase and decrease regularly. One major reason why the shares change is because of the advertising campaigns that insurers design.

There are some major players in the marketplace that are always on the top of the list. That’s because some companies have been selling products for decades and others have huge marketing budgets. Here’s a breakdown of how the carriers stack up in the most recent rankings:

  • 1. State Farm
  • 2. Liberty Mutual
  • 3. Allstate Corportation
  • 4. Berkshire Hathaway
  • 5. Travelers Companies
  • 6. Progressive Corportation
  • 7. Nationwide Mutual Group
  • 8. American International Group
  • 9. Farmers Insurance Group
  • 10. USAA Insurance Group

What are the most popular marketing tactics used by insurance companies?

online car insurance search

There are all types of marketing strategies that have proven to work in the insurance industry. The strategy and type of tactics that a company uses dependĀ on the niche being targeted. This is why insurance companies spend millions employing marketing experts to run data and come up with strategy.

If you pay attention to it, you might notice that you’ve been exposed to insurance ads on several different platforms. This is so that the marketing message can be communicated in a number of different ways to different market segments. Here are some popular tactics:

  • Social Media Marketing
  • Email marketing
  • Marketing through comparison site affiliates
  • Newspaper ads
  • Billboard
  • Sports and stadium sponsorships
  • TV ads

Why is TV such a popular medium for insurance marketing?

TV might be an expensive platform to advertise on, but for companies that have the resources, television commercials still make the most sense. If you’re curious as to why companies are spending millions on TV campaigns on a product as boring as auto insurance, there’s a number of correct answers. Here are the most popular reasons:

  • Since about 50% of consumers are insured with a top writer of insurance, having a strong brand is key
  • The industry is changing and buying insurance doesn’t require an agent. Because of this commercials are able to direct buyers online for convenience
  • TV ads can take a tone that attracts a large audience (humor, save money, fear)
  • TV ads can reach all types of demographics based on the channel you choose, the day you run an ad, and time the commercial is played

While you might be bombarded by all of the commercials you see online, there’s not end in sight. As long as ads are building brand awareness, you’ll see them running during your favorite programs. If you’d like to see if these carriers are really as competitive as they claim, use a comparison tool now and see what you’ll pay if you switch. Enter your zip code in our FREE tool below to compare car insurance rates instantly!

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