Why are there so many car insurance commercials?

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Gianetta Palmer is a writer for CarInsurance101.com, copywriter, and essayist. Her work has appeared in EverydayHealth.com, Healthline, and The Dyrt Magazine. She is the author of Scrunchie-Fried and writes a lot about car insurance...

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Melanie Musson is the fourth generation in her family to work in the insurance industry. She grew up with insurance talk as part of her everyday conversation and has studied to gain an in-depth knowledge of state-specific car insurance laws and dynamics as well as a broad understanding of how insurance fits into every person’s life...

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Reviewed byMelanie Musson
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UPDATED: Mar 13, 2020

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It’s hard to watch TV, flip through a magazine or surf the Internet without coming across an insurance advertisement. This is a fairly new phenomenon; just 10 or 20 years ago, insurance companies rarely advertised. When they did, the commercials tended to be straight-forward and even a little stuffy.

In many ways, Geico may be responsible for the sudden influx of auto insurance commercials. Beginning in the late 1990s, Geico began an aggressive advertising campaign targeted at a young, tech-savvy audience. These commercials were some of the first insurance ads to be lighthearted and focus on saving money rather than the importance of protection.

In their wake, other companies began airing similar commercials. Now, from State Farm’s magical jingle to Allstate’s handsome agent of chaos, insurance commercials are more focused on humor than ever before. They’re also much more plentiful. Although part of this can be attributed to competition between companies, a main reason for this sudden explosion of insurance ads is rooted in the changing environment of insurance in general.

Thanks to technology, people are shopping for policies in a way that was impossible a few years ago, and they care more about a company’s accessibility than ever before. In order to stay competitive in the marketplace, insurance companies must rely heavily on direct sales advertising to reach their customers.

The Changing Face of Insurance

Not so long ago, insurance policies were sold almost entirely through agencies. These brokers would utilize expansive knowledge about different insurance companies to determine which company would be the best fit for each insured. For example, an agent may know that one company offered discounts to students while another offered discounts to retirees. By utilizing this knowledge, the agent could provide the best service to an individual policyholder.

Insurance agents also had specialized knowledge that was hard for most regular customers to get. They understood coverages and the claims process and could explain this information to their customers. The agent served as the central point of contact for the insured, and there was no reason for the insurance company to deal directly with its customers since all policies were filtered through agencies.

The Internet changed all of this. Now information that was once difficult to obtain can be found through online databases, and it’s possible to obtain insurance quotes online rather than relying on an agency. Although insurance agents still fulfill a valuable role in customer service, many people prefer the ease and convenience of purchasing policies online.

Direct Sales Insurance

Because of the changing market, insurance companies quickly discovered that it was necessary to market their products directly to the consumer. More importantly, insurers found that they needed to market their products carefully to lure in precisely the type of policyholders that they wanted. This is why certain people qualify for better discounts through some insurance companies than others: People who fit that company’s target demographic will always pay the lowest rates.

Direct sales insurance benefits the insurance company in several ways. It helps them carefully target their customers, allowing them to cherry-pick their insureds to a great extent. It also helps keep operating costs low as there is no need to pay a large agency support staff in all areas. By utilizing centralized customer service and claims support staff in call centers, the insurance company can maximize productivity while reducing cost. Considering how many of these customer service centers are outsourced, operating costs drop even lower.

Direct sales insurance also benefits the insured. Customers have a greater array of options when shopping for coverage, and they are able to customize their policies to a greater extent. Most companies now offer technological solutions to their customers, like mobile apps for claims reporting and the ability to change policies online.

The Future of Insurance

Although direct sales policies are certainly popular, many individuals prefer the hands-on customer service of an agency support staff. Having a single point of contact for insurance questions, claims and policy changes is valuable to many people, not just customers who grew up with the old agency model. Indeed, companies like Geico and Progressive have begun selling through agencies specifically to appeal to that demographic.

From online quotes and peppy advertisements to agencies and claims centers, the ultimate goal of any insurance company is responding to the needs of its clients. Insurance is one of the most competitive industries, and companies will do whatever it takes to maintain an edge over their competition. This is good for the consumer, as a higher rate of competition means the best possible rates for policies. By taking advantage of comparison shopping, you can make sure that you’re getting the best possible deal on insurance, even if the company isn’t widely-advertised or particularly well-known.

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