’s promise to save 15% or more on auto insurance might come up a little short later this year after the property/casualty giant announced plans to raise premium prices this.
The move comes after GEICO, well known for its gargantuan $1.18 billion advertising budget, saw its underwriting profit tank by $193 million to settle at $160 million. The loss was the result of increases in both claims frequency and severity; the insurer’s loss ratio increased to 80.1 last quarter, up from 75.8 during the same period last year.
Loss and loss adjustment expenses were up 16.6%, while underwriting expenses increased 9.5%.
“As a result,” the company said in its SEC filing, “we are implementing premium increases as needed.”
GEICO was quick to dismiss any notion that it had been inadequately pricing risk, however.
“The automobile insurance business is highly competitive in the areas of price and services. Some insurance companies may exacerbate price competition by selling their products for a period of time at less than adequate rates,” GEICO said in its 2014 filing. “GEICO will not knowingly follow that strategy.”
Despite its underwriting losses, GEICO was able to boost its premiums written by 10.2% to $5.886 million, while voluntary policies in-force have increased by 39% over the past five years.
GEICO credits its status to “an aggressive advertising campaign and competitive rates.” The insurer is currently the second largest auto insurer in the country, behind State Farm
, with a market share of about 10.8%.
The top five auto insurers in the country claim a total of 52% of the market share in terms of premium volume, according to 2013 rankings by SNL Financial.
GEICO has not yet revealed estimates of its intended premium increases, nor when it plans to introduce them.