Progressive Corp., the fourth-largest U.S. auto insurer, boosted spending on marketing this year to win customers after scaling back in the second half of 2016 when increased costs from car accidents threatened the company’s profit goals.
“We’re excited to be back in, with full advertising,” Chief Executive Officer Tricia Griffith said Friday in a conference call discussing results at the Mayfield Village, Ohio-based company. Now is the time to highlight the brand because more drivers will be getting “rate shock” from rivals that are raising premiums, she said.
Insurers have been hit by higher-than-expected claims as more drivers take to the road and succumb to distractions, such as texting on their smartphones. State Farm Mutual Automobile Insurance Co., the largest company in the industry, said this week that it had a $7 billion underwriting loss on car coverage last year. Progressive has been an industry leader in gathering data on driving trends, and prides itself on being quick to raise rates when necessary, and then win market share when rivals follow.
Progressive, which relies on the charisma of its spunky saleswoman Flo, has gained 12 percent this year, the best advance in the the 21-company S&P 500 Insurance Index. The stock traded for $39.68 at 12:04 p.m. in New York, unchanged from Thursday’s close.
Warren Buffett, the billionaire chairman of Berkshire Hathaway Inc., said in his most recent annual letter that the company’s Geico unit is poised to benefit from disruption in the industry. While some auto insurers may be reluctant to write more policies due to the unpredictability of the loss costs, Buffett said, Geico is accelerating new business efforts.
Buffett Makes Hay
“We like to make hay while the sun sets, knowing that it will surely rise again,” Buffett said in the letter posted online Saturday.
Griffith, who became CEO last year, highlighted Flo this week in a letter to shareholders, noting that she got a nod from hip-hop artist Drake in a Saturday Night Live appearance and was mentioned in a Stephen King novel.
“She represents what we strive to be for consumers – helpful, unique, and providing a product that is competitive,” Griffith wrote.