No one who spends any time in front of a television or a laptop screen has to be told that the insurance industry is a big spender in the world of advertising. According to an analysis issued by S&P Global Market Intelligence in June, Geico, Progressive and State Farm alone spent a combined $5.38 billion in 2020 on advertising. That’s up $570 million, or 12 percent, from the previous year.

Among State Farm’s $1.17 billion in outlays was an estimated $5.5 million for a 30-second spot in Super Bowl LV, featuring one of its regular celebrity spokespeople, Green Bay Packers’ quarterback Aaron Rodgers. Yahoo! recently estimated that Aaron is paid $2 million to $3 million a year by the insurer. That’s at least one-tenth of the $20 million salary of State Farm President and CEO Michael Tipsord.

Various media outlets have reported that State Farm has decided to keep writing big checks to Rodgers despite a recent controversy over his vaccination status and his commentary surrounding COVID-19. A statement issued by the nation’s largest auto insurer called the unvaccinated and COVID-infected athlete “a great ambassador.”

“We don’t support some of the statements that he has made, but we respect his right to have his own personal point of view,” a State Farm spokeswoman said in a statement. “We recognize our customers, employees, agents and brand ambassadors come from all walks of life, with differing viewpoints on many issues. Our mission at State Farm is to support safer, stronger communities. To that end, we encourage vaccinations, but respect everyone’s right to make a choice based on their personal circumstances.”

The Rodgers controversy shines a spotlight on the insurance industry’s practice of spending billions on advertising, money from premiums that critics say should be used elsewhere.

“The insurance industry spends billions of dollars of policyholder money on sporting events, athletes in advertisements, and quirky commercials, when they should be focused more on better claims practices and reduced premiums,” said Douglas Heller, an independent consultant and nationally recognized insurance expert.

“With the exception of California, where strong consumer protection rules limit the advertising expenditures that can be passed on to customers, all those ads are funded with premium dollars,” Heller told Repairer Driven News. “That’s a terribly inefficient use of policyholder cash, since we all have to buy insurance whether we see the ads or not. When I hear Liberty Mutual say that ‘you only pay for what you need,’ I’m pretty sure that none of their customers need or want their ads, but they still have to pay for them.”

The California Code of Regulations states,

The following expense items shall not be allowed for ratemaking purposes: … (f) Institutional advertising expenses. “Institutional advertising” means advertising not aimed at obtaining business for a specific insurer and not providing consumers with information pertinent to the decision whether to buy the insurer’s product.

“States should adopt rules that require insurer advertising budgets to be a drain on company profit margins, not their policyholders’ pockets,” Heller said.

There seems to be no end of the spending in sight, according to AdAge magazine, which covers the advertising industry. In fact, if anything, it’s expected to accelerate, as insurers seek ways to become memorable in viewers’ eyes.

AdAge talked with top marketers and ad agency execs representing 10 leading insurers for its Feb. 21 article, “How the Insurance Industry Got Into a $4 Billion Ad Brawl.” “What we found is that no one plans to apply the brakes anytime soon. If anything, insurers believe the way to stand out is to spend more,” AdAge’s E.J. Schultz wrote.

“The goal is to grab the attention of consumers who would rather not think about insurance,” Schultz wrote. “Experts say most people only ponder policies when they have an accident, buy a new car, move, or renew their existing agreement, which usually happens twice a year.”

More information

California § 2644.10. Excluded Expenses

https://govt.westlaw.com/calregs/Document/I4B84C640D49211DEBC02831C6D6C108E?contextData=%28sc.Default%29&transitionType=Default

Images

Featured image: Aaron Rodgers, left, the quarterback of the Green Bay Packers, is paid $2 million to $3 million a year to appear in advertisements for State Farm, Yahoo! has reported. (Provided by State Farm)