Companies Like Geico Threaten The Small Business Aspect of Insurance

Since I’m in the insurance industry, I often get asked about what the deal is with Geico. When I get asked about the same topic repeatedly, I like to make a blog post with my opinion of the answer so that it’s out there for other folks that might have the same question.

community

As someone that is very active in my community, I find it very important to support local businesses. I like keeping my money in my community. I’ll also go out of my way to support small businesses when I’m in other communities. I hate seeing empty store fronts and longtime businesses closing their doors so this is important to me. When I do shop at a business owned by a big corporation, I try my best to make sure it’s a corporation that treats their employees well with benefits and a living wage like Costco, Publix, and QuickTrip.

For decades, insurance has been obtained through local insurance agents. Most agencies are small businesses, many run by families for generations. Independent agents can provide personalized customer service that you just can’t get from a call center. Unfortunately, many of these small businesses can’t compete with the multi-million dollar ad campaigns from companies like Geico and Esurance. Many of the other companies that are rated just as high as these mega companies rely on the agents to do their marketing locally. Often times, the premiums aren’t even the lowest, but they do a good job of convincing people that they are by the masses with their TV commercials. They are very talented at marketing, but most small businesses would be too if they had the same budget.

small-business

In my opinion, Geico and Esurance are the Wal-Mart’s of the insurance world. They cut out the middle man (the small business part of insurance) and pay their agents that work in their call centers a low, hourly wage. The industry standard is that agents are paid based on their sales commission and after five years in the industry, many agents have built up a book of business earning them a comfortable living and that goes up every year as long as they keep their clients happy.  Warren Buffet owns Geico and he is one of the wealthiest men in the world, but his company pays agents 44% less than the average insurance agent according to data collected by Career Bliss and U.S.News. It’s probably a much more significant difference because the overall average includes Geico employees so that lowers that number as well. It would be a shame to see this trend continue and for the local agencies and agents to become a thing of the past because most do not consider the Geico salary of under $30k a living wage.

call center meme

I think it’s safe to say to that most people do not like dealing with call centers. Small businesses have to keep their clients happy, especially when selling a product they buy again every year. It’s nice to be able to know your independent agent by name and to know they can advocate for you if you ever have a dispute with your carrier because they work for you, not the insurance company. When dealing with a call center, you never know who you’ll get on the phone, how many times you’ll have to be transferred, and how many numbers you have to press before talking to a real person. To them, you are just a number on the phone queue. My clients have my personal cell phone number.

small business sign

Know where your money is going and please support small businesses. By doing so you keep your money local and this helps your local economy. I don’t like being negative about another company, but I feel like this opinion and information was worth sharing.

More articles on the subject:

http://www.huffingtonpost.com/don-mcnay/geico-insurance_b_3034345.html

http://www.nytimes.com/2015/01/19/technology/insurance-via-internet-is-squeezing-agents.html?_r=0

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