The news: Insurance companies are among the most recognizable TV advertising brands, but new data from S&P Global Markets shows they are cutting ad spend dramatically, similar to automotive companies.
- Geico leads the spending decline, slashing its budget from $2.07 billion in 2021 to $1.28 billion in 2022, a 38% decrease and the steepest among its insurance contemporaries. In October, Geico laid off a “sizable” portion of its marketing department and parted ways with long-time ad agency Horizon Media.
- Spending fell 7.6% from $1.87 billion to $1.73 billion at Progressive and decreased 26.9% to under $1 billion at Allstate. State Farm spending dropped from $1.07 billion to $1.01 billion.
Why is this happening? Insurance is joining other longtime, big advertising spenders like automakers in slashing spending and rethinking marketing strategies as the economy softens.
- The insurance industry has had a rough go in recent years as home issues during lockdowns and post-lockdown traffic increases caused insurance claims to spike. Those claims and repairs are more costly and time-consuming now due to supply chain issues, and insurers are suddenly finding themselves paying huge amounts out of pocket.
- That means premiums have gone up at almost twice as fast as the rate of inflation. Disruptors like Lemonade are also undercutting the market, offering cheap prices that are costing “premium” insurers like Geico business.
- Desperate to cut costs, Insurers are curbing their ad spending. While issues like cord-cutting might make it easier for these companies to justify cuts, they’re not a driving factor the way they are for the auto industry, especially since Geico and other insurers are heavy spenders across various advertising channels, and all of it is getting cut.
Our take: Insurance’s spending downturn doesn’t help the struggling ad market, but that industry’s cuts are due more to internal issues than the broader problems plaguing advertising. Still, cord-cutting and digital attribution issues certainly make it easier to justify cuts.