Will I really save $782 if I switch my insurance to Liberty Mutual? Or $445 by switching to Progressive? Will I really save $519 if I switch to Geico? How about a whopping $1400 by switching to Allstate? Can I save $1400 on my insurance in Oklahoma?
It’s on TV, so it must be true, right?
These are anecdotal claims. They don’t have to be true for everyone. It’s like saying people who play the lottery will win millions of dollars. Although some do win, most don’t. We all understand that reality.
If everyone saved $1400 by switching to Allstate wouldn’t it either be the only insurance company on the planet, or go bankrupt? There are nearly 6,000 insurance companies in the United States alone.
There are people reading this right now that aren’t even paying $1400 per year on their auto insurance. Wouldn’t this mean they could get their insurance for FREE?
I know, now I’m just being ridiculous.
What can’t be conveyed in a 15 or 30 second commercial is how insurance is a very serious contract. Insurance was created to allow people to take financial risks they couldn’t normally take should that risk fail.
Insurance is a wonderful thing! But in their effort to tie humor with insurance advertisers have created a misconception in the mind of consumers. Advertisers have made people believe that insurance is simple. It can be purchased cheaply and casually.
I love good entertainment. I believe entertainment can also be educational.
Insurance companies have some of the most creative and entertaining advertising you can find.
Have you ever wondered why?
Insurance is one of the most competitive sales industries in the world. There is a lot of money at stake. The U.S. insurance industry’s net premiums written totaled over $1.2 trillion in 2016, according to S&P Global Market Intelligence.
Insurance companies spend BILLIONS of dollars on advertising. Geico is the “king of insurance advertising” spending $1.1 billion dollars on advertising in 2015.
For some perspective, the Oklahoma state budget for public education is about $ 2 billion. (source: Oklahoma State Department of Education)
State Farm was a distant second at a mere $543 million in advertising, just edging out Progressive at $516 million. Even USAA, which is available only to American military personnel and their families spent over $1.4 million dollars advertising mostly to people who couldn’t buy from them, even if they wanted to!
Why do you have insurance? It’s not because of an advertisement…
Let’s say you want to buy a $250,000 house, but need to borrow the money to do it. Without insurance there is no mortgage company on the planet that would make that loan. Who’s going to pay off the loan if the house burns down or is destroyed in a storm?
The insurance company will because you have a policy (contract) where you agree to pay a premium in exchange for the insurance company’s promise to pay off your loan in the event of a total loss. You may not view your insurance this way, but you should.
Let’s say you’re 37 years old, married with 2 kids. You have a good job where you are making $100,000 per year. Just coming into the most important 20 years of your financial life. Then it dawns on you that you won’t live forever and you probably need life insurance.
At $100,000 per year, you will earn $2 million dollars over the next 20 years. But if you die in this time period where will your family get that income? Life insurance.
If you are willing to pay a few hundred dollars per year, a life insurance company will give you a contract that says they will pay your family a life insurance benefit if you die too early. You may not view your life insurance this way, but you should.
This is where most people change the channel.
It’s getting too serious.
That’s why insurance commercials don’t get into that type of stuff.
Advertisers know customers better than customers know themselves. They know we want to be entertained. So, they bring in a duck, or a lizard, or a silly lady in an apron. They might even pay some really big bucks to get professional athletes to do some silly stuff for us.
Advertising is all about message reinforcement. My son was singing the “Nationwide is on your side” jingle during ballgames on TV before he could even spell insurance.
Insurance is not usually an “impulse buy” service. That’s why most insurance advertising focuses on humor. Humor is a very strong emotion.
If Geico can make you laugh while telling you they sell car insurance, your brain will associate that good emotion with Geico and they will likely be one of the brands you consider first when your need for insurance comes up.
Consumers are being conditioned by insurance commercials to focus only on price. That’s how most people compare companies and policies. Insurance commercials make it sound like all insurance is the same, only the price is different.
How often do you really think about your insurance anyway? Most people think about it when their premium goes up and again when they need to file a claim. Nothing entertaining about those two events.
Education is the real job for those of us who work with people building their insurance plan. You deserve to be advised by an insurance professional that is focused on protecting your assets and income.
If you get no education in the process of buying your insurance, why shouldn’t you assume your plan is everything it should be?
Insurance can be a “do-it-yourself” project online or a professional interaction with an insurance advisor. (Read our blog on the pros and cons of both.) Either way it should be a thoughtful exercise in assessing and protecting your unique risks.
When consumers are pressed to make less interesting purchase decisions, like shopping for insurance, they’ll end up going for what’s easiest, not necessarily what’s best. As is described in the article How Advertising Affects Consumer Behavior it pays to be the first brand they think of, and insurance companies have plenty of money to spend on that privilege.
Don’t expect the profusion of insurance advertising to go anywhere any time soon.
I hope not. Sometimes the commercials are more entertaining than the game I’m watching!
We would welcome the opportunity to help you with your insurance plan. Call our office at 405-340-0606.
Or, complete this short form and we’ll reach out to you to start our conversation.