Progressive Corp. took over the No. 2 spot in the U.S. private auto insurance marketplace during the second quarter, overtaking, at least for now, rival GEICO Corp. due in part to the way the companies discounted premiums as pandemic lockdowns idled motorists.
Progressive posted double-digit year-over-year growth, while GEICO lost premium, resulting in the two car insurance giants switching places on the table, based on direct premiums written, an S&P Global Market Intelligence analysis shows.
GEICO, a Berkshire Hathaway Inc. subsidiary, reduced premium prices by 15% for new and renewal customers, while Progressive and Allstate Corp. provided temporary premium reductions to policyholders during the quarter.
Progressive booked its discount as an underwriting expense; GEICO and Allstate recorded their adjustments as lowered premiums.
Marketplace leader State Farm Mutual Automobile Insurance Co. offered premium relief and dividends to policyholders to account for the sharply reduced driving miles resulting from efforts to slow the spread of the coronavirus.
Shrinking losses from still-depressed driving, which is in turn holding down the number of car accidents across the country, have already invited competitive pressure in the auto insurance marketplace, in which temporary and potentially permanent shifts in driving habits will favor the technologically agile.
Carriers have continued to benefit from policyholders driving less, said Deloitte consultant Matt Carrier. As that reality finds its way to consumers, they could be drawn to cost-saving policies that charge according to the miles they drive, he said in an interview.
“The larger carriers are trying to accelerate their development of the more sophisticated products like pay-as-you-drive or pay-as-you-go,” he said. “Those that can get into the market earlier could have an advantage with some of those products.”