Geico Closes All Offices in California

[Alpha8472]

Geico has closed all 38 of its offices in California and laid off all of its employees. I used to pass by a very busy Geico in Pleasant Hill, California. It was in an outdoor shopping center anchored by Kohl's, Dick's Sporting Goods, and Dollar Tree. The Geico office really caught the eye and allowed people to walk in and see if Geico really did save people money.

Without these offices, Geico customers must now rely on internet interactions only. Customers are not allowed to buy insurance policies over the phone in California. Geico is a subsidiary of business giant Berkshire Hathaway.

https://www.sfgate.com/bayarea/article/ ... 343088.php

[storewanderer]

Geico claims they will still be present in CA, so it is unclear what is happening here. Maybe some of these will reopen as agent locations. Sort of odd the way this was handled if that is what they are going to do.

[buckguy]

They claim to have 2 million+ customers in California. Given their market share nationally (14%), they should have way more customers than that. It's likely that the operation is meeting profit targets and they haven't been growing. Their agents are contractors not employees.

The last time I talked to my agent (different company), he speculated that the future was going to be online and wondered if anyone would replace him when he retired. I have relatives in other areas of insurance who have said the same thing---they saw it as a fine business for now but not one they'd advise anyone to enter.

[storewanderer]

They claim to have 2 million+ customers in California. Given their market share nationally (14%), they should have way more customers than that. It's likely that the operation is meeting profit targets and they haven't been growing. Their agents are contractors not employees.

The last time I talked to my agent (different company), he speculated that the future was going to be online and wondered if anyone would replace him when he retired. I have relatives in other areas of insurance who have said the same thing---they saw it as a fine business for now but not one they'd advise anyone to enter.

These offices were staffed by employees, not independent contractor agents. They still have a couple agents left in California. They can't shut down agents quite that abruptly (they can kick agents out but logistically not all at once on the same day).

The problem in the insurance industry is the agents are receiving less and less of a cut when writing new policies, and less and less of a commission for servicing policies. This has been particularly bad in the health insurance industry as the "affordable" care act basically cut ongoing agent commissions out for ACA plans for servicing the plans (one of the things they decided could be cut out to save people money, the agents lobbying group clearly failed them as various other special interests were well protected).

The insurance business does not have a good future for the agents. It had a good run...

[HCal]

Anyone remember storefront travel agents? Those are long gone. I'm surprised insurance agents lasted this long. Even the elderly can use the internet just fine these days.

[buckguy]

They claim to have 2 million+ customers in California. Given their market share nationally (14%), they should have way more customers than that. It's likely that the operation is meeting profit targets and they haven't been growing. Their agents are contractors not employees.

The last time I talked to my agent (different company), he speculated that the future was going to be online and wondered if anyone would replace him when he retired. I have relatives in other areas of insurance who have said the same thing---they saw it as a fine business for now but not one they'd advise anyone to enter.

These offices were staffed by employees, not independent contractor agents. They still have a couple agents left in California. They can't shut down agents quite that abruptly (they can kick agents out but logistically not all at once on the same day).

The problem in the insurance industry is the agents are receiving less and less of a cut when writing new policies, and less and less of a commission for servicing policies. This has been particularly bad in the health insurance industry as the "affordable" care act basically cut ongoing agent commissions out for ACA plans for servicing the plans (one of the things they decided could be cut out to save people money, the agents lobbying group clearly failed them as various other special interests were well protected).

The insurance business does not have a good future for the agents. It had a good run...

It's actually not clear from the article whether these are employees of the company or contractors. I did a random search of other places and they seem to use contractors. Their website still has a number of what appear to be contractors in California but it's not clear if they are still active.The reliance on contractors seems to be true in their home base (the DC area) where they probably have the largest market share of any insurer.

The model for how to grow as an insurance company seems to be Progressive. They still have agents, mostly as a legacy of when it focused on high risk customers and agents could switch people from Aetna, Travelers, etc. to Progressive if they had a DUI or something else that changed their risk, but later Progressive used the internet to broaden their customer base.

[veteran+]

Anyone remember storefront travel agents? Those are long gone. I'm surprised insurance agents lasted this long. Even the elderly can use the internet just fine these days.

AAA still has physical Travel Agents.

[Super S]

I have had insurance in the past from companies without local agents. I encountered very long hold times whenever I had to call even for a simple question. I prefer having a local agent where I can stop in when I have a simple question or change I need to make. The internet doesn't always have the answers.

I do periodically shop around to make sure my rates are fair (and often end up just staying with my policy as I have for over 7 years), and have found Geico to almost always have the highest rates.

[storewanderer]

I have had insurance in the past from companies without local agents. I encountered very long hold times whenever I had to call even for a simple question. I prefer having a local agent where I can stop in when I have a simple question or change I need to make. The internet doesn't always have the answers.

I do periodically shop around to make sure my rates are fair (and often end up just staying with my policy as I have for over 7 years), and have found Geico to almost always have the highest rates.

Having a local insurance agent is very helpful when you have ongoing insurance needs to have handled. The local agents can have different ways to reach the internal areas of whatever carrier they represent and they are able to, ideally, resolve issues and speed through claims issues much faster than you as a customer would be able to doing it on your own. But it has gotten harder and harder for local agents and it seems over the years the service provided to local agents has declined as they are often stuck waiting on long holds to get help or leaving voice mails when in the now distant past they were able to bypass that sort of thing.

For instance if you do not like your rate, you can call your local agent and voice your concerns. The local agent cannot do anything about your rate. All they can do is request some kind of document from the carrier about your rate and check to make sure you are being rated "correctly." Basically the same thing you could do on your own.

The agents feel more and more powerless.

Where it gets really interesting is with some independent agents who will sell products from multiple carriers. They will work for years with a specific carrier, any issues, are resolved in a timely and satisfactory manner. Since COVID, everything has changed. Everyone is working from home. Nothing happens efficiently. Then a big payment comes down (let's say a life insurance payment) and suddenly the carrier plays the slow pay game, then the "doesn't respond to messages from the agent for a week" game. The agent gets upset and writes a letter to upper management of the carrier. The claim is magically paid within a couple days. That agent talks to some other agents who have had similar experiences with the carrier in question lately. That agent now faces a dilemma- sell any more policies from that carrier, knowing how they currently operate, or move on? Nothing illegal is being done. It is the difference of a given carrier that had, in the past, been superior to others, falling to be more similar to the others.

[Romr123]

The other benefit of an independent agent is to know which carrier to place the business with. Michigan's extraordinarily sensitive to insurance rates (highest in the country, albeit with the best coverage you could get). I worked for one of the big local insurers for a while in the HQ. Rating is very complex, and there are interesting arcane combinations which make things quite expensive or quite cheap. A good agent will know which company is competitive in certain combinations of situations (much less granular-ly than the company, of course, but the agent won't bother with a company which s/he knows is uncompetitive with young drivers, or with muscle cars, or with specific zip codes/census tracts).

Where we live is a wealthy inner-ring suburb adjacent to the city of Detroit, and walking distance to a very low-income census tract also in the suburban area. A friend who was a "tied agent" for Michigan Farm Bureau insurance (akin to these agents working for GEICO) wouldn't even bother quoting to us because he knew he was uncompetitive in this specific area (yet 1 mile away was quite competitive).