As auto rates have soared across the country, Warren Buffet’s Geico Corp. has latched onto marketing its products using a discount system, known as the "Welcome Factor," for new clients applying for personal auto insurance. The discount is available across a number of states.
This incentive offers a discount to fresh policyholders, which gradually diminishes over successive renewal phases. This initiative was first disclosed through a submission to Virginia's state regulatory body on February 29. Following this, similar discounts were proposed in Oregon, Wisconsin, New Mexico, and Illinois, according to rate filings collected by S&P Global Market Intelligence up until March 20. The proposals for Virginia and Oregon are currently under review by regulatory authorities.
The discount magnitude, the duration over which it diminishes, and the particular Geico subsidiary providing this discount differ from one state to another. GEICO Secure Insurance Co. is the subsidiary offering this discount across all five states mentioned, with GEICO Choice Insurance Co. also providing policies in Oregon, Virginia, and Wisconsin.
The discount starts at 9% in Virginia, Oregon, Wisconsin, and Illinois for the initial term, then drops to 6% upon the first renewal, reduces further to 3% at the second renewal, and is completely eliminated in subsequent renewals. In New Mexico, the discount is set at an initial 5%.
GEICO Secure has also lodged filings for other rate reductions aside from the Welcome Factor discount for new customers, effective from the outset of 2024.
Based on the actuarial memorandum in filings for Kentucky, Minnesota, and Pennsylvania, these rate reductions are attributed to a decline in claim frequency for new business year-over-year. The total rate reductions in these states are 9.8%, 7.0%, and 4.1%, respectively.
The year 2023 saw a significant influx of premium dollars into GEICO's Secure subsidiary, marked by a substantial increase in direct premiums written, which grew by approximately 36% to reach $3.94 billion. This growth rate was the second highest among the nine GEICO subsidiaries that underwrite personal auto insurance nationwide.
Geico Texas County Mutual Insurance Co. unit, which exclusively operates in Texas, recorded the most significant annual increase in direct premiums, surging by 66.7% in 2023.
Photo: Mike Mozart, licensed under the creative commons 2:0 license.
