The gap continues to widen between what online car insurance companies and traditional carriers spend to land new policyholders, new research shows.
Direct insurers — those that sell policies directly to consumers through the mail, the Internet or telephone solicitations — had an average “acquisition cost” of $487 per policy in 2014, while captive insurers — those relying heavily on exclusive agents — spent an average of $792, according to research from William Blair & Co.
In 2013, those two channels spent on average $490 and $759, respectively, said Adam Klauber, an analyst with the Chicago-based investment bank.
“Acquisition costs” to acquire new customers include agent commissions and advertising expenses.
Direct carriers Progressive and Geico spent $519 and $451, respectively, to acquire customers, while Bloomington-based State Farm and Northbrook-based Allstate, which does most of its business through exclusive agencies, devoted $827 and $711 to win a customer, Klauber said in his 16-page analysis.
Companies that depend on independent agents spend an average of $900.
“Insurers that market directly to consumers have the lowest costs due to minimal commissions and more efficient cost structures, which allow them to spend more on advertising relative to peers and drive higher growth as a result,” Klauber said. “Lower acquisition costs are driving higher premium growth for the direct insurers as they can offer policies at a more competitive price.”
In 2014, the direct insurers grew auto premiums by 9 percent compared with 4 percent for insurers with captive-agency forces and flat growth for insurers that use independent agents.
State Farm spokeswoman Holly Anderson said Friday there’s no longer a hard line between Internet companies and non-Internet companies.
“Our customers do a lot of business with us online, but our goal is to provide customers with many avenues to us so that they can choose the avenue they like best,” she said. “Many customers prefer to talk with us on the telephone or in person.”
Allstate said its strategy is to “provide a broad set of competitively differentiated products” to several segments of the insurance market. Its business units include online insurer Esurance, which has been unprofitable.
“We are the largest publicly traded personal lines insurance company in the United States, with the brands and scale necessary to create sustainable growth,” Allstate spokeswoman Maryellen Thielen said.
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