The Government Employees Insurance Company (GEICO) is an auto insurance company. GEICO (pronounced /ˈɡaɪkoʊ/) is a wholly owned subsidiary of Berkshire Hathaway that as of 2007 provided coverage for more than 10 million motor vehicles owned by more than 9 million policy holders. GEICO writes private passenger automobile insurance in all 50 U.S. states and the District of Columbia. Rather than relying on agents to sell policies, GEICO uses a direct-to-consumer sales model and puts funds saved from not paying agent commissions toward the purchase of television advertising, with several campaigns running simultaneously in national markets. Its mascot is a gecko with an Cockney accent.
Serves 10 million auto policyholders and growing
-- Insures more than 16 million vehicles
-- Third-largest private passenger auto insurer in the United States (based on 2008 market share data as reported by the National Association of Insurance Commissioners, March 2009)
-- Fastest-growing major auto insurer in the U.S., with policies-in-force growth of 8.9 percent in 2008
-- Employs 24,000 associates
-- Maintains 12 major offices around the country
In 1996, GEICO became a wholly owned subsidiary of Berkshire Hathaway, headed by Warren Buffett, one of the country's most successful investors. For the past three years (2006, 2007, and 2008), Fortune magazine has named Berkshire's property-casualty insurance operation the most admired in the country.
GEICO was founded in 1936 by Leo Goodwin and his wife Lillian to provide auto insurance directly to federal government employees and their families.[2] Since 1925 Goodwin had worked for USAA, an insurer which specialized in insuring only military personnel; he decided to start his own company after rising as far as a civilian could go in USAA's military-dominated hierarchy. Based on Goodwin's experience at USAA, GEICO's original business model was predicated on the assumption that federal employees as a group would constitute a less risky and more financially stable pool of insureds, as opposed to the general public. Despite the presence of the word "government" in its name, GEICO has always been a private corporation.
The Goodwins relocated GEICO in 1937 to Washington, D.C. and reincorporated as a D.C. corporation after realizing that their business model would work best in the place with the highest concentration of federal employees.
An important figure in GEICO's history is David Lloyd Kreeger, who became president of the company in 1964 and helped steer it into a major insurance enterprise. In 1948, he formed a group of investors who bought into GEICO right before it went public that year. He became senior vice president and general counsel of the company. Six years after becoming president of GEICO in 1964, he was named chairman and chief executive officer. He retained those titles until he retired in 1974. He continued as chairman of the executive committee until 1979, when he was named honorary chairman. Intriguingly, the GEICO web site avoids any mention of Kreeger.
In 1950 GEICO expanded its geographical reach, winning a license to sell insurance in the key New York market as well as in nine other states. The company further expanded its potential market of policyholders in 1952 when it made all state, county, and municipal workers eligible for coverage. As a result of this change, over 41,000 new policyholders joined the company in that year. Written premiums jumped by more than 50 percent, to $15.2 million. To handle some of the influx of new customers, GEICO opened an information office in New York City, at 125 Broadway. This facility was so heavily used that an underwriting staff was added later in 1952 and a claims staff was installed the following year.
Also in 1953 GEICO purchased the old Federal Housing Administration Building at Vermont Avenue and K Street Northwest in Washington, D.C. Two years later, it was renamed the GEICO Operations Building. Also in 1955 GEICO expanded the types of insurance coverage it offered when it began writing fire insurance for dwellings and personal belongings in Washington, D.C., Maryland, and Virginia.
In 1956 GEICO took its first step toward automating its operations when it installed an IBM Type 500 Magnetic Drum Data Processing Machine at its operations facility. By the following year, premiums had increased to $36.2 million. In 1958 GEICO expanded its customer pool further when it added civilian professional, technical, and managerial occupation groups to those who were eligible for insurance coverage. With this enlargement, the company's number of policies rose to 485,443. Its customers were spread throughout the nation. The following year, GEICO moved again to a bigger facility; its 1,100 employees were transferred to a newly built Operations Center in Chevy Chase, Maryland, a suburb of Washington.
The company continued its technological innovation the following year when a new telephone system was installed in Chevy Chase that could handle up to 50 incoming calls at once. Also in 1960, GEICO extended the services it offered when it began to market a homeowners insurance package to its policyholders. By the following year, this package was being offered in 36 states and the District of Columbia. In 1961 GEICO also organized the Criterion Insurance Company to provide automobile insurance for enlisted military personnel who did not meet GEICO's good driver standards.
Along with this expansion in the types of coverage it offered, GEICO continued its geographical expansion in 1961 when it opened the company's first West Coast office, in San Francisco. Employees in this office handled sales, policy service, and claims settlement. A year later the company opened a second western office, in Denver. This facility was the headquarters of the Government Employees Finance Company (GEFCO), which was set up to make personal and educational loans. Nine years after its inception, this company was merged with the Government Employees Corporation (GECO), another loan outfit.
In 1964 GEICO pased the one million policyholders mark. In the following year, the company opened its first drive-in auto claim center in Chevy Chase, Maryland, to serve Washington-area policyholders. GEICO and its various subsidiaries continued to expand throughout the 1960s. By 1968, the company had offices in 24 states and three foreign sites: England, West Germany, and Okinawa. GEICO's foreign offices were located near large concentrations of U.S. servicemen.
By 1971, GEICO had become the fifth-largest publicly held auto insurance company in the United States. In the following year, the company passed the two million policy mark: its number of policies written had doubled in just eight years. After this remarkable postwar growth streak, however, GEICO began to lose its way as the structure of the insurance industry started to change.
In 1973 GEICO abolished the last of its occupational restrictions on eligibility for insurance. This step was only taken after a seven-month period of study, during which company executives decided that new computerized data bases, which provided information on an individual's driving record, provided sufficient means for determining who was a good driver. In place of reliable driver record information, the company had previously generalized on the basis of occupation about a driver's probability of mishap, but with access to new data, GEICO felt that it could safely expand its pool of potential clients. With this step, the company made its services available to the entire population. By the end of the year, this move had helped the company to become the fourth-largest publicly held auto insurer, with more than $479 million in annual premium income.
To solicit further growth in the population at large, GEICO ran advertisements, sent out 25 million pieces of direct mail a year, and relied on word of mouth from its current policyholders. In addition, the company had 123 field offices where salaried agents sold insurance policies. A network of regional offices with switchboards and operators was also being built, and the first center, a $13.1 million facility in Woodbury, New York, was dedicated in October, 1973. With a greater emphasis on regional operations, the company hoped to entice more customers west of the Mississippi, where only 20 percent of its policyholders lived.
Despite this push for new customers, GEICO continued to insist that it only insured good drivers. By this time, however, the company's reliance on good drivers to keep its claims down was becoming less and less feasible as no-fault insurance laws swept the nation. Under the old system, the insurer of the driver at fault in an accident paid for everything. Since GEICO drivers were rarely at fault, the company paid out little in fees, which enabled it to keep its premiums down. Under the new system, however, claims were determined by how much damage was done, not by who was at fault. In addition, GEICO found itself squeezed by regulatory restrictions on its rates, as public outrage about rising insurance costs caused states to pass laws limiting the amounts that companies could charge. These new laws, along with GEICO's headlong expansion, brought the company to the brink of disaster in the mid-1970s. The company had overestimated its own financial strength and discovered that it had underestimated its losses by $100 million. In 1975 GEICO reported a loss of $126.5 million, as high claims for hospital and auto repair fees battered its bottom line.
In May of 1976 GEICO appointed a new chairman, and the company undertook an aggressive program to stay afloat. With the assistance of the District of Columbia's Insurance Superintendent and the rest of the insurance industry, a rescue plan was devised for the company. A consortium of 27 insurance firms took over one-quarter of the company's policies, on a commission basis, so that the company would not fail and shake public confidence in the insurance industry. A stock offering of $76 million, to be used to pay off claims, was successfully completed, and GEICO also instituted a stringent cost-containment program, called Operation Bootstrap, in which policyholders in certain states were dropped and other high-risk drivers were eliminated, among other measures.
Although losses for 1976 equaled $26.3 million, by 1977 GEICO was proclaiming that it had returned to financial solvency, and the company began a period of retrenching and reorganizing. In 1978 GEICO began to acquire the stock of its three sister companies in an effort to diversify the company's lines of business. In January, 1979, a holding company for all the GEICO properties was formed and named the GEICO Corporation. By the start of the 1980s, GEICO was a much smaller company than it had been at its height in the 1970s, and it began to move cautiously into new areas. In 1981 the company formed Resolute Group, a reinsurance subsidiary set up to insure insurers. Also in that year, the company formed the GEICO Investment Services Company.
After selling off its 66 percent interest in GELICO, GEICO made a series of acquisitions. In 1982 the company bought a property casualty insurance company, which wrote standard insurance, and named it GEICO General. The company also bought the Garden State Life Insurance Company, and renamed it the GEICO Annuity and Insurance Company. The Criterion Casualty Company was also formed to write policies for young male drivers who could not obtain insurance elsewhere.
In 1984 GEICO increased its level of automation, and this investment was rewarded with lower costs and higher profits. Throughout the 1980s GEICO stuck to its core business of writing insurance policies for good drivers, and the company's financial position steadily improved. By 1991, its profits had reached $193.8 million, and the company had become the country's seventh-largest automobile insurer. In an effort to expand its market, GEICO formed an automobile club to compete with the American Automobile Association (AAA), and also tried to increase its market share in the homeowner's insurance field. In addition, the company continued its policy of buying up its own shares, strengthening its financial position further. As GEICO moved into the mid-1990s, the firm appeared to be well suited for continued financial stability. After its close brush with oblivion in the mid-1970s, the company had returned to its original franchise of low-cost insurance for good drivers, using no middlemen, and demonstrated that it could thrive in this niche.
Principal Subsidiaries: Government Employees Insurance Company; GEICO Indemnity Company; Criterion Casualty Company; GEICO General Insurance Company; Government Employees Financial Corporation; Merastar Insurance Company; Southern Heritage Insurance Company; Criterion Life Insurance Company.
Statistics:
Public Company
Incorporated: 1936 as Government Employees Insurance Company
Employees: 7,805
Sales: $2.08 billion
Stock Exchanges: New York
SICs: 6331 Fire, Marine & Casualty Insurance
Address:
One Geico Plaza
Washington, D.C. 20076
U.S.A.
Serves 10 million auto policyholders and growing
-- Insures more than 16 million vehicles
-- Third-largest private passenger auto insurer in the United States (based on 2008 market share data as reported by the National Association of Insurance Commissioners, March 2009)
-- Fastest-growing major auto insurer in the U.S., with policies-in-force growth of 8.9 percent in 2008
-- Employs 24,000 associates
-- Maintains 12 major offices around the country
In 1996, GEICO became a wholly owned subsidiary of Berkshire Hathaway, headed by Warren Buffett, one of the country's most successful investors. For the past three years (2006, 2007, and 2008), Fortune magazine has named Berkshire's property-casualty insurance operation the most admired in the country.
GEICO was founded in 1936 by Leo Goodwin and his wife Lillian to provide auto insurance directly to federal government employees and their families.[2] Since 1925 Goodwin had worked for USAA, an insurer which specialized in insuring only military personnel; he decided to start his own company after rising as far as a civilian could go in USAA's military-dominated hierarchy. Based on Goodwin's experience at USAA, GEICO's original business model was predicated on the assumption that federal employees as a group would constitute a less risky and more financially stable pool of insureds, as opposed to the general public. Despite the presence of the word "government" in its name, GEICO has always been a private corporation.
The Goodwins relocated GEICO in 1937 to Washington, D.C. and reincorporated as a D.C. corporation after realizing that their business model would work best in the place with the highest concentration of federal employees.
An important figure in GEICO's history is David Lloyd Kreeger, who became president of the company in 1964 and helped steer it into a major insurance enterprise. In 1948, he formed a group of investors who bought into GEICO right before it went public that year. He became senior vice president and general counsel of the company. Six years after becoming president of GEICO in 1964, he was named chairman and chief executive officer. He retained those titles until he retired in 1974. He continued as chairman of the executive committee until 1979, when he was named honorary chairman. Intriguingly, the GEICO web site avoids any mention of Kreeger.
In 1950 GEICO expanded its geographical reach, winning a license to sell insurance in the key New York market as well as in nine other states. The company further expanded its potential market of policyholders in 1952 when it made all state, county, and municipal workers eligible for coverage. As a result of this change, over 41,000 new policyholders joined the company in that year. Written premiums jumped by more than 50 percent, to $15.2 million. To handle some of the influx of new customers, GEICO opened an information office in New York City, at 125 Broadway. This facility was so heavily used that an underwriting staff was added later in 1952 and a claims staff was installed the following year.
Also in 1953 GEICO purchased the old Federal Housing Administration Building at Vermont Avenue and K Street Northwest in Washington, D.C. Two years later, it was renamed the GEICO Operations Building. Also in 1955 GEICO expanded the types of insurance coverage it offered when it began writing fire insurance for dwellings and personal belongings in Washington, D.C., Maryland, and Virginia.
In 1956 GEICO took its first step toward automating its operations when it installed an IBM Type 500 Magnetic Drum Data Processing Machine at its operations facility. By the following year, premiums had increased to $36.2 million. In 1958 GEICO expanded its customer pool further when it added civilian professional, technical, and managerial occupation groups to those who were eligible for insurance coverage. With this enlargement, the company's number of policies rose to 485,443. Its customers were spread throughout the nation. The following year, GEICO moved again to a bigger facility; its 1,100 employees were transferred to a newly built Operations Center in Chevy Chase, Maryland, a suburb of Washington.
The company continued its technological innovation the following year when a new telephone system was installed in Chevy Chase that could handle up to 50 incoming calls at once. Also in 1960, GEICO extended the services it offered when it began to market a homeowners insurance package to its policyholders. By the following year, this package was being offered in 36 states and the District of Columbia. In 1961 GEICO also organized the Criterion Insurance Company to provide automobile insurance for enlisted military personnel who did not meet GEICO's good driver standards.
Along with this expansion in the types of coverage it offered, GEICO continued its geographical expansion in 1961 when it opened the company's first West Coast office, in San Francisco. Employees in this office handled sales, policy service, and claims settlement. A year later the company opened a second western office, in Denver. This facility was the headquarters of the Government Employees Finance Company (GEFCO), which was set up to make personal and educational loans. Nine years after its inception, this company was merged with the Government Employees Corporation (GECO), another loan outfit.
In 1964 GEICO pased the one million policyholders mark. In the following year, the company opened its first drive-in auto claim center in Chevy Chase, Maryland, to serve Washington-area policyholders. GEICO and its various subsidiaries continued to expand throughout the 1960s. By 1968, the company had offices in 24 states and three foreign sites: England, West Germany, and Okinawa. GEICO's foreign offices were located near large concentrations of U.S. servicemen.
By 1971, GEICO had become the fifth-largest publicly held auto insurance company in the United States. In the following year, the company passed the two million policy mark: its number of policies written had doubled in just eight years. After this remarkable postwar growth streak, however, GEICO began to lose its way as the structure of the insurance industry started to change.
In 1973 GEICO abolished the last of its occupational restrictions on eligibility for insurance. This step was only taken after a seven-month period of study, during which company executives decided that new computerized data bases, which provided information on an individual's driving record, provided sufficient means for determining who was a good driver. In place of reliable driver record information, the company had previously generalized on the basis of occupation about a driver's probability of mishap, but with access to new data, GEICO felt that it could safely expand its pool of potential clients. With this step, the company made its services available to the entire population. By the end of the year, this move had helped the company to become the fourth-largest publicly held auto insurer, with more than $479 million in annual premium income.
To solicit further growth in the population at large, GEICO ran advertisements, sent out 25 million pieces of direct mail a year, and relied on word of mouth from its current policyholders. In addition, the company had 123 field offices where salaried agents sold insurance policies. A network of regional offices with switchboards and operators was also being built, and the first center, a $13.1 million facility in Woodbury, New York, was dedicated in October, 1973. With a greater emphasis on regional operations, the company hoped to entice more customers west of the Mississippi, where only 20 percent of its policyholders lived.
Despite this push for new customers, GEICO continued to insist that it only insured good drivers. By this time, however, the company's reliance on good drivers to keep its claims down was becoming less and less feasible as no-fault insurance laws swept the nation. Under the old system, the insurer of the driver at fault in an accident paid for everything. Since GEICO drivers were rarely at fault, the company paid out little in fees, which enabled it to keep its premiums down. Under the new system, however, claims were determined by how much damage was done, not by who was at fault. In addition, GEICO found itself squeezed by regulatory restrictions on its rates, as public outrage about rising insurance costs caused states to pass laws limiting the amounts that companies could charge. These new laws, along with GEICO's headlong expansion, brought the company to the brink of disaster in the mid-1970s. The company had overestimated its own financial strength and discovered that it had underestimated its losses by $100 million. In 1975 GEICO reported a loss of $126.5 million, as high claims for hospital and auto repair fees battered its bottom line.
In May of 1976 GEICO appointed a new chairman, and the company undertook an aggressive program to stay afloat. With the assistance of the District of Columbia's Insurance Superintendent and the rest of the insurance industry, a rescue plan was devised for the company. A consortium of 27 insurance firms took over one-quarter of the company's policies, on a commission basis, so that the company would not fail and shake public confidence in the insurance industry. A stock offering of $76 million, to be used to pay off claims, was successfully completed, and GEICO also instituted a stringent cost-containment program, called Operation Bootstrap, in which policyholders in certain states were dropped and other high-risk drivers were eliminated, among other measures.
Although losses for 1976 equaled $26.3 million, by 1977 GEICO was proclaiming that it had returned to financial solvency, and the company began a period of retrenching and reorganizing. In 1978 GEICO began to acquire the stock of its three sister companies in an effort to diversify the company's lines of business. In January, 1979, a holding company for all the GEICO properties was formed and named the GEICO Corporation. By the start of the 1980s, GEICO was a much smaller company than it had been at its height in the 1970s, and it began to move cautiously into new areas. In 1981 the company formed Resolute Group, a reinsurance subsidiary set up to insure insurers. Also in that year, the company formed the GEICO Investment Services Company.
After selling off its 66 percent interest in GELICO, GEICO made a series of acquisitions. In 1982 the company bought a property casualty insurance company, which wrote standard insurance, and named it GEICO General. The company also bought the Garden State Life Insurance Company, and renamed it the GEICO Annuity and Insurance Company. The Criterion Casualty Company was also formed to write policies for young male drivers who could not obtain insurance elsewhere.
In 1984 GEICO increased its level of automation, and this investment was rewarded with lower costs and higher profits. Throughout the 1980s GEICO stuck to its core business of writing insurance policies for good drivers, and the company's financial position steadily improved. By 1991, its profits had reached $193.8 million, and the company had become the country's seventh-largest automobile insurer. In an effort to expand its market, GEICO formed an automobile club to compete with the American Automobile Association (AAA), and also tried to increase its market share in the homeowner's insurance field. In addition, the company continued its policy of buying up its own shares, strengthening its financial position further. As GEICO moved into the mid-1990s, the firm appeared to be well suited for continued financial stability. After its close brush with oblivion in the mid-1970s, the company had returned to its original franchise of low-cost insurance for good drivers, using no middlemen, and demonstrated that it could thrive in this niche.
Principal Subsidiaries: Government Employees Insurance Company; GEICO Indemnity Company; Criterion Casualty Company; GEICO General Insurance Company; Government Employees Financial Corporation; Merastar Insurance Company; Southern Heritage Insurance Company; Criterion Life Insurance Company.
Statistics:
Public Company
Incorporated: 1936 as Government Employees Insurance Company
Employees: 7,805
Sales: $2.08 billion
Stock Exchanges: New York
SICs: 6331 Fire, Marine & Casualty Insurance
Address:
One Geico Plaza
Washington, D.C. 20076
U.S.A.
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