Insurance Marketing - Changing Focus (1,584 words)
At GEICO, we do not wish this cost to deter our associates from the aggressive pursuit of new business—which, as it renews, will deliver significant profits.
In 1995, the year before the Berkshire acquisition, GEICO spent $33 million on advertising. In 1998, it spent $143 million. In 1999, it spent an estimated $190 million.
The point? Buffet continues:
There is no limit to what Berkshire is willing to invest in GEICO's new-business activity, so long as we can concurrently build the infrastructure the company needs to properly serve its policyholders. Because of the first-year costs, companies that are concerned about quarterly or annual earnings would shy away from similar investments, no matter how intelligent these might be in terms of building long-term value. Our calculus is different: We simply measure whether we are creating more than a dollar of value per dollar spent—and if that calculation is favorable, the more dollars we spend the happier I am.
Here are a couple of points for you to ponder:
• Warren Buffet comes from outside the insurance industry!
• He understands customer lifetime value!
• Buffet delivers his shareholders higher value than most insurance operations!
• Warren Buffet has deep pockets!
Buffet, in fact represents a significant threat to the insurance industry—the same type of threat represented by General Electric's Jack Welch.
Buffet is in the process of brand-building. Welch is leveraging brand. In a sense both have become the next generation of insurance direct marketing pioneers.
And the future?
Proliferation and Technology
Insurance industry change is being driven by non-insurance leaders—not uncommon for change agents.
Nonetheless, there are two dominant themes governing the future of insurance direct marketing over the next five years: proliferation and technology.
First, technology. The challenges and the opportunities represented by the Internet are, to say the least, profound. And especially so for the insurance direct marketing community.