Most Americans are familiar with the car insurance giants, GEICO and Progressive. The two companies have captured around 20% of the auto-insurance market by flooding the airwaves and the internet with goofy advertisements.
The two insurers are deep discounters that dominate the market by offering easy to get auto insurance policies at a very low price. They accomplish this by utilizing the same business model: selling insurance directly to consumers without agents. Eliminating the agents creates lower costs that GEICO and Progressive can pass on to customers.
Their consumer-driven business model is based on advertising, which enables both companies to reach large numbers of customers directly. This allows for direct selling and low rates but it can be impersonal.
GEICO at a Glance
The Government Employees Insurance Company (GEICO) is a subsidiary of Warren Buffett’s conglomerate Berkshire Hathaway (NYSE: BRK.B). GEICO invented the direct selling and consumer merchandising auto insurance business model that Progressive has a successfully copied.
GEICO’s mascot and spokesman the Gecko is one of the most recognized fictional characters in America. GEICO is one of the few auto insurers to offer policies in all 50 states and the District of Columbia.
Despite its size, GEICO is highly ranked for customer service, having received a four out of five rating in nearly all the categories J.D. Power grades insurers upon. That means GEICO offers better-than-average service and meets most customers’ needs. The only area GEICO was weak in was the repair process where it received three out of five stars.
Generally, GEICO did as well or better in most categories than higher rated and more expensive companies. GEICO seems to meet the needs of most customers at a good price.
Progressive at a Glance
The Progressive Corporation (NYSE: PGR) is a publically-traded company best known for crazy commercials featuring actress Stephanie Courtney as the larger than life cashier Flo. Like GEICO, Progressive is one of the few auto insurers to offer policies in all 50 states.
Progressive captured a large share of the auto-insurance market by being the first company to offers policies for sale over the phone and on the internet. Progressive’s Immediate Response Vehicles which carry appraisers to accident scenes are a familiar sight on America’s highways.
Progressive’s JD Power Ratings are lower than GEICO’s which indicates less customer satisfaction. Progressive only received a four out of five rating in one category: rental experience. Since the rental is not handled by Progressive that indicates some problems.
Progressive’s other ratings are slightly above average for the industry. It got a score of three on the other categories, including overall satisfaction. That means most customers are satisfied with Progressive but not necessarily happy with it.
Which is Better GEICO or Progressive?
The J.D. Power data indicates that most customers were happier with GEICO than with Progressive.
There are some advantages to Progressive. Progressive offers more discounts and its coverage can be slightly cheaper. It usually takes five years of accident-free driving to get a 26% discount from GEICO. Progressive offers a 31% discount for those with no accidents or tickets on their record three years.
GEICO is a better deal for high school and college students; because it offers a straight 15% discount for any student under 24 years old who has a 3.0 grade point average (GPA). Progressive’s discount varies and ends at 22 years of age. Progressive offers additional discounts for persons studying more than 100 miles from home.
GEICO offers discounts of up to 15% for active duty and retired military and an 8% discount for federal employees. Discounts for bundling with homeowner’s insurance are available.
Progressive offers no military or federal employees’ discounts but it does offer lower rates for “bundling” policies. Progressive will offer additional discounts through the Name Your Price tool. Progressive offers more discounts to individuals willing to put its Snapshot Wi-Fi tracking devices on their vehicles.
Both companies offer discounts for vehicles with antitheft devices and safety features such as antilock brakes and passive restraints. Different rates are offered for ridesharing (Lyft and Uber) drivers and groups like business owners.
Despite the discounts, rates will vary from state to state largely because of differences in state laws. Smart consumers will compare both companies before settling on a policy.
Both companies offer good coverage that will satisfy most drivers’ needs, although GEICO’s customer satisfaction rating is higher. Persons seeking better customer service should go with GEICO. Those seeking discounts might save more money at Progressive.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.