By Carolyn Said, SAN FRANCISCO CHRONICLE
August 2, 2022
GEICO, the nation’s second-largest auto insurer, is limiting its physical presence in California and eliminating telephone sales of new policies here.
The company is closing 38 local offices in the state and laying off hundreds of employees, according to the Sacramento Bee and industry trade journals, and is pausing telephone sales of new policies here, although consumers can still sign up online. Existing policies will remain in force.
“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,” the company said in a statement to The Sacramento Bee.
GEICO did not respond to Chronicle requests for comment, but the California Department of Insurance confirmed that the insurer had closed its brick-and-mortar offices here, a move that does not require the department’s approval.
“GEICO is continuing to serve customers and sell policies in California, but only via online and its app,” the department said in a statement. “We are monitoring this situation closely to make sure consumers continue to be protected.”
GEICO’s website offers a drop-down menu to find agents by state. Selecting California returns no results.
Headquartered in Chevy Chase, Md., GEICO is owned by Warren Buffet’s Berkshire Hathaway.
Insurance trade publications reported that GEICO had also halted telephone sales in 15 states, including New Jersey, New York, Arizona and Wisconsin, plus the District of Columbia.
Janet Ruiz, a spokesman for the Insurance Information Institute, a nonprofit trade group, said that limiting business in a state is a normal way that insurance companies try to balance their risk. “It’s basic but you take in a certain amount of premiums and pay out a certain amount of losses,” she said.
The industry contends that California’s insurance rates which must be approved by the Department of Insurance are too low. Trade publications attributed GEICO’s California pull-back to its inability to get permission to hike its insurance rates here.
“The Department of Insurance in California has artificially kept rates lower than maybe they should,” Ruiz said, arguing that inflation, supply chain issues, rising reinsurance rates and increased wildfire risk justify higher rates.
Consumer advocates had a different take.
“Sounds like GEICO is trying to use its market power to extort unjustified increases in its insurance rates,” said Harvey Rosenfeld, founder of Consumer Watchdog, a nonprofit that monitors the insurance industry. “Customers of GEICO ought to be wary of this behavior and look for a company not trying to overcharge people for auto insurance.
“Obviously GEICO’s not withdrawing from Califonia; no company ever would because it’s too lucrative a market, the biggest state in the nation for auto insurance,” he said.
For once, his words were echoed by the insurance industry.
“Insurance companies want to stay in California; it’s a large economy, and they want to keep their customers,” said Ruiz from the industry trade group. “We definitely want to keep insuring people here. That’s also why they work hard to balance their books of business so they can keep insuring the customers they have.”