The rates consumers shop for car insurance has gone down to the lowest level in the last 5 years, with only 25% of insurance customers indicating they shopped for a new insurer in the past 12 months, down 8% from 2011.

Despite over $5 billion in advertising and marketing spent in 2011. Since most car insurance renews every 6 months, policyholders could shop (online?) twice per year. But since the 2009 downturn, consumers have slowed their shopping for new policies.

Every car insurer promises to save shoppers $400 over the competition. So if buyers actually realize that savings, they decided they would not get much benefit from searching again in 2011 & 2012. Still some people actually get hired, move or get married and look for a new carrier.

For Car insurance buyers who went online for a new policy in 2011, 43% switched providers — the highest rate since the study first began measuring retention in 2008, and an increase of 3% from 2011. Car insurers are not marketing the price savings that were not there during the insurance price wars 2 years ago.

Insurance companies are raising rates to cover claims. State filings to increase premiums have gone up. So now they are focusing on different parts of the car insurance market like motorcycle owners, or renters insurance.

I believe car insurers should focus on fundamentals within a car insurance policy, like how much car insurance drivers need. Maybe a special auto insurance deductible.

In California, around 15% of drivers are uninsured. That is a higher risk, but potentially profitable market. And the insurers are not competing with any old loyalty. For the most part, insurers have done a good job educating policy holders about how car insurance works, now they need to market cost savings within a policy.

Enough with the talking Geico lizards and cavemen!

Car insurance premiums have less to do with your driving and more to do with gender, age, if you are married, the garaged address, and type of car.

GPS based discounts are becoming more popular for good reasons. Insurance carriers offer discounts. Progressive’s system called Snapshot, is in 37 states. With Snapshot, you plug a palm-size tool into the diagnostic port in your car and it pulls data from the car’s computer and sends it to Progressive over a cell signal. The tool tracks the time of driving, mileage, and hard acceleration and hard braking. After 30 days, you can earn a safe driving discount; after 6 months, you send the tool back and save up to 30%. There’s no cost for the hardware, and (supposedly) Progressive won’t raise your rates if it turns out you are hell on wheels.

Allstate offers Drive Wise in Arizona, Illinois and Ohio. The tool collects similar data as Snapshot, and the number of times you exceed 80mph. Allstate will give you a 10% for installing Drivewise, and 30% on your renewal.

Allstate charges $10 to get started in Drivewise, but need to keep it installed to keep the discount every policy renewal. Neither Progressive nor Allstate tracks GPS location info, so your travels stay private.

General Motors’ OnStar system offers discounts to low-mileage drivers. OnStar is free for the first year for new GM vehicles; subscriptions cost $19 to $29 per month.

State Farm’s Drive Safe & Save program is being offered in California, Colorado, Illinois, Ohio and Texas. They also use OnStar. You get a 5% discount for signing up and after 30 days the discount can go up to 44% based on mileage. The discount is recalculated with each policy renewal, so you have to keep the onstar subscription.

GMAC Insurance offers customers in 35 states and averages an 8% discount only for having an active OnStar subscription. You have to enroll in OnStar and drive under 15,000 miles per year, to get at least a 13% discount. If you drive under 2,500 miles per year, the discount could be as large as 54%.

Over 30% of people surveyed in a 2011 MSN Money-Zogby survey, rate Progressive’s customer service “poor.” Progressive has been around for over 8 decades and is the nation’s 4th largest auto insurer. They have an aggressive marketing campaign buying millions in on and offline advertising, direct sales, innovative customer options and competitive rates.

But Progressive Insurance has been alleged to make customers discuss use low-cost auto shops, get inadequate repairs, or low ball reimbursements. Progressive responded with a Forrester Research award for the company’s customer feedback.

In the J.D. Power 2010 customer-satisfaction index, Progressive won a 775 score, below the average score of 777 out of 32 US auto insurers. Progressive profited over $1 billion profit in 2010.

New Jersey Manufacturers Group was the largest insurer in the state to receive zero valid complaints, according to a report by the state’s insurance department.

NJM is the third largest insurer in the state with 13 percent of the market. GEICO has close to 15 percent of the market, while Allstate comes in with slightly more than 14 percent.

The 2010 Auto Insurance Consumer Information Report ranks companies from worst to best in terms of valid complaint ratio. That ratio is the number of valid complaints to 1,000 insured autos. A valid complaint is defined as when “[t]he insurer’s action violated state insurance rules or laws or the issue in controversy should have been resolved by the insurer without department intervention.”

NJM had zero valid complaints and was joined by eight other companies on the list. The company was the largest insurer in the group to meet such a distinction. Palisades Group was the second largest insurer in this group.

In terms of direct written premium, Palisades Group is ranked fourth behind NJM with 10.5 percent of the market.

Allstate was ranked sixth on the complaint list with 44 valid complaints. In 2009, the company was ranked 14 and in 2008 it was ranked 13.

GEICO was ranked 15 with 19 valid complaints. In 2009 it achieved the same ranking of 15, and in 2008 it was 20.

However, the ranking in one sense can be deceptive. The worst-ranked insurer on the list was Personal Service Insurance Co. However, the company had only three valid complaints out of 13,627 vehicles it insured, but its valid complaint ratio was highest at 0.2202. It is ranked 24 in terms of direct premium written with less than 1 percent of the market.

NJM, in comparison, has 804,801 vehicles insured.

“In a competitive market, shoppers should use consumer studies like this to help evaluate an insurance company,” says NJM President and CEO Bernard Flynn in a statement. “The department’s findings show that NJM has excelled in fulfilling our obligations to policyholders, and we’re very pleased by the results.”

By Erik Holm

Geico Corp., the car insurer owned by Warren Buffett’s Berkshire Hathaway Inc. (BRKA, BRKB), added 188,500 new customers in the first seven weeks of 2011, putting it on pace for its best quarter for new business in two years.

Customers are flocking to Geico as it spends ever-increasing sums on advertising. The company also appeared to be holding the line on prices while some rivals are raising rates in an effort to improve profit margins.

The two U.S. auto insurers larger than Geico, State Farm Mutual Automobile Insurance Co. and Allstate Corp. (ALL), were charging customers more for coverage at the end of 2010 than they were at the beginning. With price increases in 32 states and decreases in 10, State Farm’s overall auto insurance rate rose by 2.8% in 2010, a spokesman said. So far in 2011, the company has raised prices in eight states and cut prices in one state.

Geico, meanwhile, was charging its average customer about the same at the end of last year as it did at the start, according to Berkshire’s annual report on Saturday.

That pricing trend helped Geico attract 165,000 new policyholders in last year’s fourth quarter, and put the company on pace to add about 350,000 drivers by the end of March. That increase would be significantly more than in any three-month period since the first quarter of 2009, when consumers were drastically curtailing their spending amid the depths of the financial crisis.

Halfway through the record-setting first quarter of 2009, Buffett crowed then that he and Geico Chief Executive Tony Nicely felt like “two hungry mosquitoes in a nudist camp. Juicy targets are everywhere.”

In his latest letter to shareholders, Buffett said Geico had “enthusiastically” spent $900 million on advertising in 2010 after spending $800 million in 2009. While an exact comparison to the marketing budgets of other insurers is difficult, the figure is likely significantly higher than the next biggest spender.

Geico’s underwriting profit jumped 72% to $1.12 billion in 2010, while Allstate’s fell 30% to $766 million. State Farm, which is owned by its policyholders, is expected to report 2010 results Tuesday.

Pay-As-You-Drive auto insurance programs are gaining fans because they can provide drivers big discounts, over 20%. Usage based insurance depend on type of vehicle used, and measures against a driver’s time, distance and place. Pay as you drive (PAYD) means that the insurance premium is calculated dynamically, typically according to the amount you drive.

Types of coverage for usage based auto insurance:

1. Coverage is based on the odometer reading.
2. Coverage is based on the number of minutes the vehicle is being driven and transmitted by cell or RF signal.
3. Coverage is based on hard braking, speed and time-of-day driven.

With car monitoring based insurance driving data is automatically transmitted to the insurer. Driver behavior dictates the cost of insurance dynamically, as their driving changes. Drivers have a bigger incentive to drive safe. If a driver commutes to work less often, that would reduce the risk of rush-hour accidents. With computer monitoring, that reduction would effect their insurance rates right away.

How Much Can Insureds Save?

Pay-as-you-drive car insurance is for drivers who log less than 15,000 miles a year. The less you drive, the less you pay, which can provider discount, from 8% to 54%, says Tim Hogan, GMAC’s vice president of national accounts. Mileage information is collected by a telematics-based vehicle tracking system, and your discount grows for every 2,500 miles fewer you drive. For example, someone who drives between 10,001 and 12,500 miles might save 18%, while someone who drives under 10,000 miles a year could save 25% off standard rates.

Companies offering Pay As You Drive Car Insurance

MileMeter was the first is car insurance company offering pay-by-the-mile auto insurance. They currently only provide insurance in the state of Texas.

Progressive has a pay-as-you-drive program called Snapshot. Snapshot provides discounts of up to 30% per year from its regular car insurance rates. Snapshot is currently available through 25 states. Because each state has separate insurance regulations, the Snapshot is slowly getting approval in each state. Snapshot provides discounts on auto insurance based on mileage, times of day the car is used and hard braking. Driving late at night 12am to 4am a notorious time for accidents and sudden acceleration and stops are warning signals.

Snapshot works only for cars made after 1995 because the device needs an onboard computer and diagnostic port. The device monitors mileage, time of day when the car is driven and driving style. There is no GPS tracking exact location, which has some privacy issues.

GMAC Insurance, in collaboration with OnStar, offers a discount in 35 states for those who have a GM vehicle equipped with OnStar and drive fewer than 15,000 miles per year. By the end of 2011, GMAC’s goal is offer the monitoring (with associated discounts) in most states.

Disadvantages of Pay As You Drive Car Insurance

- Prepaid insurance charges for future driving rather than past risk, so it’s imprecise.
- Distance based driving may not differentiate highway, city, or country road driving.
- A tracking system may charge less to a slower driver who changes lanes abruptly, or drives in an inattentive or careless manner.
- Some systems may use location tracking, which could unacceptable infringe on driver’s privacy.

GEICO leads the way in the mobile technology with an increasing number of car insurance mobile apps. The start of this year, Geico became the first auto carrier nationwide to allow shoppers to buy a policy with their mobile smartphones.

In 2010, GEICO its GloveBox mobile application for the iPhone, Android, Blackberry, iPad, iPod Touch, and Windows Phone 7s. Geico also released its SnapQuote app, which allows shoppers to get auto insurance rates by taking photos of their license and sending it to GEICO.

With its GloveBox mobile app, customers can change their contact info and track claims. Even consumers without smartphones have mobile capabilities with many of the same features as GloveBox.

GEICO is the 3rd largest auto insurance company in the US and insures over 16,000,000 vehicles.

Berkshire’s insurance businesses generated $1.01 billion in net income from underwriting in 2009, down from $1.7 billion last year. Total revenues from the business for the year declined to $92.78 billion from $95.70 billion in the previous year.

Berkshire’s utility division, which includes MidAmerican Energy Holdings Co. and PacifiCorp, generated net income of $1.07 billion during 2009, down from $1.70 billion in 2008. Yearly revenues at the business were $11.44 billion, down from $13.97 billion a year ago.

The manufacturing, service and retail unit at Berkshire generated $1.1 billion in net income in 2009, down from $2.3 billion the year before. Revenues from the business for the year declined to $61.66 billion from $66.10 billion last year.

In Finance and Financial Products business, which includes the operations of Clayton Homes, Fleetwood, Champion and Oakwood, the company reported a decline in income before investment and derivatives gains or losses for 2009 to $781 million from $787 million a year ago. Revenues rose to $112.49 billion from $107.77 billion.

Within the company’s investments division, total common stocks carried at Market had a cost of $34.65 billion and a market value of $59.03 billion.

Looking forward, the company Chairman Buffett reiterated that he believes the derivatives will be profitable over their lifetime, partly because Berkshire held about $6.3 billion in derivative premiums at year end that it can invest.

Buffett also said its insurance business Geico had 8.1% of the auto insurance market in 2009, but the company’s growth may slow this year because of slumping vehicle sales and high unemployment.

BRK-A last traded on Friday at $119,800.00, up 1,000.00 or 0.84%, on the NYSE. In the past 52-week period, the stock trended in a range between $118,642.50 and $120,155.00, on a 3-month average volume of 0.31 million shares.

BRK-B last traded on Friday at $80.13, up 0.73 or 0.92%, on a volume of 10.53 million shares on the NYSE. In after hours, the stock declined 0.10 or 0.12%, trading at $80.03. In the past 52-week period, the stock trended in the range of $45.02 to $80.18, on a 3-month average volume of 10.53 million shares.