GEICO has closed 38 agent offices in California, according to an August 1 article by the Sacramento Bee, and GEICO panel counsel members will want to monitor the situation. The offices sold auto and homeowners insurance policies to state residents. The Berkshire Hathaway unit also stopped selling insurance through California telephone agents, according to the Bee.
The closed California offices included locations in Sacramento, Roseville, Fresno, and Modesto, among other cities. The Roseville office opened in July 2021, meaning that it was in operation for only one year. Hundreds of California GEICO employees have reportedly lost their jobs across the state. It is not clear if these layoffs included claims adjusters.
A GEICO spokesperson told the Bee, “We continue to write policies in California, and we remain available through our direct channels for the more than 2.18 million California customers presently insured with us.”
Berkshire Hathaway, parent company of GEICO, is the second largest carrier for private passenger automobile coverage in the country, after State Farm, according to 2021 data from the National Association of Insurance Commissioners (NAIC).
Nationwide, GEICO reports more than 18 million auto policies in place insuring more than 30 million vehicles. The company writes private passenger automobile insurance in all 50 states and the District of Columbia. Insurance policies are marketed mainly by direct response methods, meaning that customers apply for coverage directly to GEICO over the Internet or by telephone.
The Coverager, an online news portal, reports that GEICO has paused phone sales in several states, including Alaska, Arkansas, California, Connecticut, the District of Columbia, Delaware, Georgia, Hawaii, Kansas, Louisiana, Massachusetts, New Jersey, New Mexico, New York, Wisconsin, and West Virginia.
GEICO promotes that it is available to insureds nationwide 24 hours a day, seven days a week, and 365 days a year via the www.geico.com website as well as a toll-free phone number.
As of mid-August 2022, GEICO lists 10 regional offices on its website, including one in California. These regional offices are located in Buffalo, NY; Dallas, TX; Fredericksburg, VA; Indianapolis, IN; Lakeland, FL; Macon, GA; San Diego, CA; Tucson, AZ; Virginia Beach, VA; and Woodbury, NY.
News for GEICO Panel Counsel Members
What is behind this restructuring?
Berkshire Hathaway, Inc. reported in its 10-Q report for the second quarter ended June 30, 2022 that it is dealing with increased claims severities resulting from cost inflation in automobile markets. The cost of used cars is increasing, and car part shortages are growing.
The frequency of claims increased in the first six months of 2022 across all GEICO lines of coverage, broken down as follows:
- Property damage (4-5 percent)
- Collision (10-11 percent)
- Bodily injury (6-7 percent)
- Personal injury (7-8 percent)
GEICO average claims severities were also higher in the first six months of 2022, as follows:
- Property damage coverage (11-12 percent)
- Collision coverage (19-20 percent)
- Bodily injury coverage (9-11 percent)
In addition to budget and staff cuts, the insurer is working to increase premiums and trim some policy volumes in pursuit of better operating numbers.
Implications for GEICO Panel Counsel Members
What is the relationship between the number of local GEICO offices and market penetration? It is hard to say, but it seems likely that the closing of neighborhood GEICO offices will result in fewer policies being written and/or renewed in the affected areas.
Insurance defense law firms that are GEICO panel counsel members may have noticed some of these factors first-hand with the auto claims they are managing. Longer term trends may include a decrease in the number of auto negligence claims if the number of California insurance policies decline.
Additionally, GEICO panel counsel law firms may be under increasing pressure to reduce legal expenses associated with claims. While we don’t have specifics on GEICO’s use of staff counsel in California, there may or may not be changes in this regard.
As always, for defense law firms that are GEICO panel counsel members, now is a good time to accelerate your business development efforts. Never stop marketing!
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This article is provided for educational purposes only. It is not to be interpreted as legal advice or an opinion in regard to any topic discussed. The article should not be used as a substitute for legal advice from a licensed attorney in your state. Every situation is different and circumstances vary widely depending on the governing state law, policy provisions, and related considerations.