Dollars well spent!?!

In a recently released report from consulting group McKinsey, they claim that over the past 10 years, the marketing spend by U.S. personal-lines insurers rose from $1.7 billion to $5.9 billion in 2011. (1)

“The auto insurance industry in the United States is one of the most aggressive in terms of marketing spend, but it may not be having the desired impact,” (2)

The problem is that these investments ware only targeting a small portion of the target market, about 30%.  This is also troubling because, this segment is historically the most price sensitive and the least loyal.  “…some carriers are spending heavily for broad brand recognition and have little to show for it."  The report suggest that more than half of the marketing dollars spent on auto insurance in the past decade came from carriers that didn’t gain share.

Does anyone benefit from all this spending???  The McKinsey report, indicates that only largest companies are actually creating value.  The 5 largest insurers in the US are recognizable to consumers and these brands maintain a high degree of depth.  This is an obvious advantage for the larger insurers when consumers decide to shop for insurance. These brands are sought after.

So how can a smaller insure compete?  The report suggest that smaller insurance companies avoid competing with large marketing budgets and focus their efforts on selective positioning opportunities. 

“We strongly believe that there are other needs out in the marketplace that are not being addressed and that is a bigger opportunity for insurers,” (1)