Is Geico Really Cheaper Than Other Insurance Companies?

If you’ve seen any television ads or listened to radio announcements, you probably know that Geico promotes itself as being cheapest car insurance.

You may wonder why Geico is so cheap, and you may even treat its promising announcements with skepticism.

We all know that car insurance premiums are based on many different factors, including age, location, and make and model of vehicle. So, wouldn’t every company base their rates on the same statistics that relate to those factors?

We’ve decided to test Geico’s promise to save you money on car insurance by studying some estimated rates.

Is Geico Really That Cheap?

To check out Geico’s rates, we looked at two scenarios: one from the California Department of Insurance and the other from the Florida Department of Insurance. (For more information, read our “Cheap Car Insurance in Florida“).

Scenario #1:

• Single Male (licensed 9 to 15 years): One car (Toyota Camry), no violations, driving around 12,600 to 15,000 miles per year, living in San Francisco County, California.

In this scenario, Geico, listed under its legal name, “Governmental Employees Insurance Company,” showed rates of $725 for basic liability-only insurance, which places it at number five out of 48 companies. Charging less than Geico was the AAA, the CSAA (California’s division of the AAA), Metromile, and Lova.

The overall average based on the 48 companies was $1,078, about $350 more than Geico’s proposal.

Scenario #2

• Single Female (licensed 9 to 15 years): One car (Toyota Camry), one violation and one no-fault accident in the preceding three years, work-driving of 12,000 miles per year, living in Miami-Dade County, Florida.

In the Florida example, Geico came in at #3 out of 20 companies with a rate of $952 for minimum coverage and $2,834 for a full policy package.

The two cheaper rates came courtesy of two separate divisions of USAA, which caters exclusively to military personnel and their families.

The overall average prices for this Florida scenario were $1,970 for minimum coverage and $5,073 for full coverage — considerably higher than Geico’s estimate.

Geico Consistently Has Lower Rates

Based on the above evidence, we would have to conclude that Geico’s insurance rates are indeed significantly lower than most top carriers.

The next question we need to consider is: How can Geico be so inexpensive?

Why Are Geico’s Rates Cheaper?

Looking at Geico’s low rates, you may be tempted to think that the company doesn’t pay out for claims received, cuts corners on hiring support personnel, and is otherwise generally a step away from bankruptcy.

However, the facts don’t support this theory.

The J.D. Powers Insurance Shopping Study for 2018 shows that overall customers feel that Geico’s service is average for the insurance industry. They rated the company “Better Than Most” in the policy offering and pricing category and “Among the Best” for the website category.

However, the company did receive a below-average ranking in the local agents category.

As to actual claims handling, the J.D. Power 2017 Claims Satisfaction Study listed Geico as number six out of 26 companies and customers rated the provider consistently “Better than Most.”

Lastly, Geico demonstrates excellent financial health, with top rankings from both A.M. Best and Standard & Poor’s. The company is backed by Berkshire Hathaway, Inc., which has assets totaling over 32 million USD.

So, if Geico is in good financial health and it provides good customer service, how can it charge such low rates?

Geico Sells Directly to Customers

Since the company’s inception, its goal has been to provide high-quality insurance at affordable rates. The founder, Leo Goodwin, decided to accomplish this by selling directly to the consumer — no middlemen necessary.

The decision went against the trend at the time, but it worked. Operating costs were reduced, and the company was able to pass those savings to its customers. The rest is history.

Geico has continued selling directly to customers and in the process, has become the second-largest insurer of private passenger vehicles in the United States.

What Else You Should Know About Geico’s Car Insurance

Currently, Geico’s headquarters are in Maryland, and the company has regional offices and service centers throughout the United States.

Thanks to their strong online presence, you can reach a customer representative 24-hours a day, seven days a week, and 365 days a year, all across the country.

Geico offers much more than auto and motorcycle insurance.

It provides a full range of policies for business owners and homeowners, along with travel and identity protection insurance.

The company offers a vast selection of premium discounts in categories such as vehicle safety, military affiliation, federal employees, students, and drivers over the age of 50.

Finally, the Geico mobile app lets you easily handle everything related to your policy, including paying bills and filing claims, right on your phone.

After reading the company’s business model, you may no longer be wondering why Geico is so cheap.

Moreover, customer surveys and independent reviews show there’s much more to this company than just low rates.

It might be worth getting a quote that fits your profile to see if you can save money by switching to Geico.