Bad Economy Boosts Direct Car Insurance Marketing

Auto Insurance News

With the financial slump taking its toll on once-strong US companies, many industry leaders are cutting back on their advertising and marketing expenses. Despite the substantial cutbacks on ad spending, auto insurance companies are resorting to more direct means to reach potential clients and customers.

Bad Economy Boosts Direct Car Insurance MarketingCar insurance firms have been relentlessly sending out direct mail offers to prospective policyholders in an effort to stem the grim economic outlook.

Mintel Comperemedia, a provider of direct marketing competitive intelligence and data, says that a total of three billion (that’s billion with a B) mail offers were sent by auto insurers to American mailboxes in from the second quarter of 2008 to the first quarter of 2009.

The firm also reports that this number was roughly the same compared to the same period one year prior. This was despite the economy’s weak standing and uncertainty over the global financial woes.

The total amount of mail offers sent in the past two years easily dwarfs the amount sent in the last five years. Auto insurance companies sent less than half of the three billion direct mail offers half a decade ago.

Mintel Comperemedia vice president of insurance services Daniel Hayes hints that the economic downturn has had unexpected results. “The recession brings new challenges, like rising repair costs and more uninsured motorists, to the auto insurance industry,” he says.

“Insurers realize higher rates won’t bode well with cash-strapped consumers, so they’re using direct mail to communicate policy changes with drivers,” Hayes adds.

Hayes also defended the auto industry and rate hikes, saying that the increase in insurance rates is necessary for car insurers to earn profit. Direct written premium (DWP) for private passenger car insurance have fallen sharply in recent years, compared with the 8% annual growth in the early 2000’s. DWP also fell by 0.4% in 2007 for the first time since 1993. Policyholders were also keen on shying away from collision coverage and focusing on deductibles to save their money. Together, these factors have resulted in a need to boost insurance revenue.

“Despite proposed rate increases, auto insurers still focus on finding savings for individual drivers,” Hayes explains. The Mintel Comperemedia official also adds “The top three themes I see in auto insurance direct mailings are saving over competitors’ rates, accident forgiveness and rewards for safe driving.”

According to Mintel Comperemedia, Geico was the top mailer of car insurance policies from the second quarter of 2008 to the first quarter of 2009. The company has sent about a third of the total direct mail offers in the said period.