Insurance companies slashed ad spending in 2023. Here’s why your rates are still high
Insurance commercials are everywhere, and compared to other financial products, the ads are especially catchy. Even if you don’t have a policy with Allstate, you’re probably familiar with Mayhem and his cartoonish crises. Jake from State Farm and Flo from Progressive are even common Halloween costumes.
It’s hard to get through a half-hour of TV without hearing a single plug for car or home insurance (or both!). All those ads cost money — big money. In 2023 alone, the four biggest insurance companies in the U.S. paid a total of $3.7 billion to get their names on your screens.
Which begs the question — is that why insurance is so expensive right now?
The short answer: no, your premiums aren’t being artificially inflated by Flo’s salary. But it’s a little more complicated than that. To help untangle the relationship between insurers’ advertising budgets and rising prices, Bankrate’s insurance editorial team looked into the marketing budgets of four major U.S. insurance companies — Allstate, Geico, Progressive and State Farm — and spoke to experts about the role of advertising in the industry.
How much do insurance companies spend on advertising?
Let’s start with a big question: How much do all of these TV ads really cost? According to data from S&P Global Market Intelligence, the total ad spend of the four largest U.S. property and casualty insurance companies by market share came to around $1 billion each in 2023, with Progressive spending the most out of any insurer.
| 2023 Total advertising budget | |
|---|---|
| Progressive | $1.22 billion |
| Geico | $0.84 billion |
| State Farm | $0.99 billion |
| Allstate | $0.65 billion |
But this wasn’t always the case. In recent years, the big four insurers have significantly reduced their marketing budgets — with a few exceptions — to adjust for major financial losses triggered by the COVID-19 pandemic and its financial and social aftermath.
Prior to 2022, Geico reigned as the biggest spender in insurance advertising, but the gecko’s budget has been slashed in the past two years, leaving Progressive at the top of the stack. Allstate, never as free with ad dollars as its competitors, experimented with a larger budget in 2021, but has since shrunk its marketing budget; it’s now the lowest it’s been in over five years. And while State Farm has kept its ad spending most consistent over the past few rocky years, it’s been putting that money in new places, focusing on TikTok rather than traditional TV ad opportunities like the Super Bowl.
An inverse relationship: Fewer ads, higher rates
While ad spending decreased in the past five years, insurance premiums went up.
In the case of homeowners insurance, average premiums increased by around 7 percent nationwide from June 2022 to June 2024, with spikes as high as 48 percent in some areas. Insurers like State Farm and Allstate pulled out of certain regions altogether.
Auto insurance increases have been even more merciless: on average, Americans paid 20 percent more for car insurance in June 2024 than they did just two years before. The four insurers above — which together control 56.23 percent of the private passenger auto insurance market and just over 40 percent of the home insurance market — contributed heavily to those rate hikes, filing for increases in dozens of states over the past few years.
Is insurance advertising raising rates?
Companies may be spending less on car insurance ads in 2024, but the juxtaposition of billion-dollar ad budgets and steep personal premiums may leave policyholders with the question: Is the amount my insurance company spends on ads raising the cost of my coverage? Or, put differently: Couldn’t I be paying less for insurance if my insurance company just stopped spending my money on ads?
According to Tim Zawacki, a principal research analyst covering the U.S. insurance industry for S&P Global Market Intelligence, the answer is no.
“Our data would indicate that it’s an inversely correlated relationship,” Zawacki says, “meaning that as ad spending declines, the cost of auto insurance is increasing.” In fact, he says, advertising spending in the insurance industry is at the lowest it’s been in 14 years or more.
Look at Progressive, Zawacki says. In 2023, Progressive cut its ad budget by nearly 30 percent. Yet this measure didn’t lead to financial relief for Progressive’s policyholders. Instead, Progressive’s average premiums for both home and auto insurance went up in spite of the $0.5 billion the company theoretically saved by cutting ad spending.
The same observation holds true if you compare each company’s advertising budget with its average premiums. According to premium data from Quadrant Information Services, Allstate, which spends the least on ads of the four insurers we looked at, charges the highest average full coverage rates for auto insurance and the second-highest for home insurance for a policy with $300K in dwelling coverage. And while Progressive spends more on ads, it has the second-lowest average premiums for auto insurance of the four big insurers.
Why ad spending doesn’t predict insurance rates
The data is clear: insurance companies that spend more on advertising don’t necessarily charge higher rates in proportion to their marketing budgets. But why is that the case?
Advertising is just one factor in an insurance company’s operating expense ratio, or the ratio of its total operating expenses (minus depreciation) to its overall revenue. Other operating expenses — in particular, the cost of covering claims for policyholders — have played a bigger role in raising rates in the past few years than the cost of advertising.
A key metric insurance companies use to measure profitability is the ratio of direct losses — i.e., money the company had to pay out in claims — to earned premiums, i.e., money the company earned back in premiums paid by policyholders. A lower loss ratio indicates higher profitability.
Let’s compare the amount each insurer spent on advertising in 2023 with the amount they made back in premiums, along with their overall loss ratios, as reported by the National Association of Insurance Commissioners (NAIC).
| Total advertising budget, 2023 | Direct premiums earned (EP), 2023 | EP per $1 of advertising, 2023 | Direct loss to earned premium ratio, 2023 | |
|---|---|---|---|---|
| State Farm | $0.99 B | $88.7 B | $89.58 | 82.85 |
| Progressive | $1.22 B | $59.9 B | $49.08 | 68.41 |
| Geico | $0.84 B | $58.1 B | $69.22 | 66.50 |
| Allstate | $0.65 B | $48.2 B | $74.15 | 73.12 |
While Progressive spent the most on advertising, it had the lowest ratio of ad spend to earned premiums, as well as the second-smallest loss ratio. In other words, Progressive is earning the least money back for what it paid in advertising — but it’s staying more profitable than its competitors. State Farm, on the other hand, made nearly $90 in premiums for every $1 it spent in advertising, but it had the highest loss ratio out of all four big insurers.
The data, Tim Zawacki says, “would strongly suggest that the drivers of higher premiums are not because companies are spending more on advertising.” Instead, companies like State Farm are losing money thanks to an increase in catastrophic weather events, an uptick in dangerous driving and historic inflation in the auto repair industry. All of these factors caused major financial losses for insurers in the wake of the COVID-19 pandemic, and they’re still working to catch up.
What about insurers who don’t advertise at all?
If you carry coverage with a smaller or regional carrier, you might never see ads for your insurance company on TV. Does cutting out advertising altogether make coverage more affordable?
Not necessarily, according to Bankrate’s data. First of all, every insurance company advertises — smaller companies with a more limited regional footprint might not buy spots on national TV, but they’re still putting money into marketing. And while the exact amount they spend on ads might be lower than Progressive or State Farm, it may still represent a similar percentage of their overall operating expenses. Even when looking at companies with significantly smaller advertising budgets, we don’t see a clear reduction in cost. The chart below compares average annual full coverage auto premiums from five popular insurance companies – Farmers, Amica, American Family, AAA and Travelers – that all spend under $100 million per year on advertising with the average premiums of our top four ad spenders.
As you can see, switching to a company that spends less on marketing won’t necessarily mean a lower premium. No matter how big or small an insurer’s advertising budget, the main forces that drive higher premiums — inflation, climate change and rising labor costs — are still in force.
How you can save on insurance in the age of big ad budgets
Switching to a company with a small ad budget might not get you a lower rate — but that doesn’t mean you can’t save on insurance. If you’re looking to save on your premiums, consider these strategies to lower the cost of coverage for home and auto insurance:
- Comparison shopping: Even in a high rate environment, you may be able to save on coverage by comparing quotes before your policy renews or after a big life change – like getting married or buying a new car. Shop around and request quotes for the same coverage from at least three to five companies to find one with prices that fit your budget.
- Weigh cost against other factors: Large insurers with big advertising budgets may come with other advantages, such as high financial strength ratings, 24/7 customer service and a smoother claims process. On the other hand, regional carriers may be more familiar with the coverage needs in your area and may have a more personalized customer service approach. Consider the pros and cons of working with a big company while you shop.
- Research discounts: Auto insurance discounts can set one company apart from another depending on what you’re eligible for. For instance, if you drive an EV, you might want to look for an insurer that offers a special discount for green vehicles. If you’re a full-time student, a company with a generous student discount could be the best fit.
- Work with a broker: Comparison shopping can be a time-consuming and frustrating experience, but working with a broker could cut down on the time you spend getting quotes and give you access to competitive rates from less well known insurance companies.
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