Best's Review


Auto Insurance
Race to the Top

Progressive and Geico have established a foothold and are closing in on No.1 State Farm in the U.S. private passenger auto insurance market.
  • Renée Kiriluk-Hill
  • October 2019
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SIDE BY SIDE: This photo illustration depicts Berkshire Hathaway's Chairman and CEO Warren Buffett (left) with Vice Chairman Charlie Munger at the company's annual meeting in May.
Photo Illustration: Angel M. Negrón


Key Points

  • The Situation: Geico and Progressive are taking steps to unseat State Farm as the No. 1 writer of private passenger auto insurance.
  • The Stats: Geico’s market share of the U.S. private passenger auto business has shot up 73.8% since 2008 and Progressive’s has gained 52.4%, compared with State Farm’s market share, which fell 4.3% since 2008, according to BestLink.
  • Mutual Advantage: As a mutual, State Farm doesn’t distribute stockholder dividends, which, over time, has given it a significant advantage over many of its stock competitors in retaining earnings and generating surplus internally.


With Vice Chairman Charlie Munger seated by his side at Berkshire Hathaway Inc.'s annual meeting, Warren Buffett was asked about market share in automobile insurance. It's a subject the top writers—State Farm, Buffett's Geico, and Progressive Corp.—are keenly aware of.

Not only do they watch each other's market share, they pay close attention to each other's loss and expense experience as well.

No. 1-ranked State Farm, while still a behemoth, has seen its all-private-passenger-auto market share level off. Geico's share has been gaining major steam, with Progressive in hot pursuit.

That raises some interesting questions, including one an equity analyst threw at Buffett, Berkshire Hathaway's chairman and CEO, during the question-and-answer session at the May meeting in Omaha, Nebraska. How does the second-largest auto insurer hold onto market share as Progressive Corp. continues to push ahead?

Buffett answered by bringing up the elephant in the room: State Farm.

“We'll watch to see five, 10 years from now which one of us passes State Farm first,” Buffett said of his company and rival Progressive.

Dream on, State Farm responded.

“We continue to lead in this highly competitive industry and serve more customers than any of our competitors,” spokesman Roszell Gadson said. “We have no intention of ceding that leadership position.”

AM Best market share data tells a compelling story.

State Farm's market share stood at 17% in 2018, compared with Geico at 13.4% and Progressive at 11%, according to BestLink data. That translates to $41.96 billion in direct premiums written for State Farm in 2018, $33.08 billion for Geico and $27.06 billion for Progressive.

But Geico and Progressive have made major gains in market share since 2008. Geico's share has shot up 73.8% since 2008 and Progressive's has gained 52.4%, compared with State Farm's market share, which fell 4.3% since 2008, according to BestLink.

Ajit Jain, vice chairman of Berkshire's insurance operations, expanded on Buffett's comments at the May meeting, offering additional insight into growth and underwriting profitability at Geico and Progressive.

“Geico has a significant advantage over Progressive when it comes to the expense ratio to the extent of about seven points or so,” Jain said. “On the loss ratio side, Progressive does a better job than Geico does. They have, I think, about a 12-point advantage over Geico.

“Geico is very aware of this disadvantage in the loss ratio that they are suffering, and they are very focused in trying to bridge that gap as quickly as they can,” Jain said.

“They have a few projects in place. Sometimes Geico is ahead of Progressive. Right now, Progressive is ahead of Geico.” He expressed hope Geico will “catch up on the loss ratio side and maintain the expense ratio advantage.”

Jain's remarks highlight the relationship between loss ratio and pricing: Over time, better-priced risk typically reveals itself via lower loss ratios.

Among the biggest three U.S. auto writers, Progressive recorded the lowest loss ratios for all private passenger auto in every year for the past 11 years, according to BestLink data. State Farm had the second-lowest loss ratio in six of those 11 years.

Jain also called attention to the importance of expenses. The expense ratio is another major component of the combined ratio.

Despite higher loss ratios during those 11 years, Berkshire Hathaway's combined ratio—often considered to be a measure of overall underwriting profitability—for all private passenger auto was lower than Progressive's in nine of those years.

A side note: Although Geico and Progressive have gained significant market share since 2008, fourth-place Allstate Insurance Group, with market share of 9.21% in 2018, recorded a loss ratio lower than Progressive's in eight of 11 years.

Michael Angelina, Saint Joseph’s University’s Maguire Academy of Insurance and Risk Management

State Farm could also be unseated by a nontraditional insurer, a startup like Root or Lemonade or someone who has never written a policy.

Michael Angelina
Saint Joseph’s University’s Maguire Academy of Insurance and Risk Management

Long-Term Goal

Geico's rivalry with Progressive is one facet of Buffett's larger ambition to overtake State Farm.

This was not the first time Buffett threw down the gauntlet concerning State Farm.

In his 2015 letter to shareholders, the octogenarian made a bold prediction. “On Aug. 30, 2030—my 100th birthday—I plan to announce that Geico has taken over the top spot. Mark your calendar.”

Progressive has its own ambitions, however. The company aspires to become “the No. 1 choice and destination for auto and other insurance,” said spokesman Jeff Sibel. “We realize there is still so much opportunity in the marketplace to help customers when, where and how they want to shop.”

AM Best Senior Analyst Michael Venezia said scale is “important, but just as important is an insurer's ability to compete efficiently and effectively as new market trends and competition grows, regulatory burdens persist, and financial pressures increase.”

Keefe, Bruyette &Woods managing director and analyst Meyer Shields said Geico and Progressive dominate the direct market, a vital portion of customers given the growing popularity of buying online. Ease of use could beat out brand loyalty, he added.

State Farm could also be unseated by a nontraditional insurer, a startup like Root or Lemonade or someone who has never written a policy, according to Michael Angelina, executive director at Saint Joseph's University's Maguire Academy of Insurance and Risk Management.

Twenty-five years ago, few thought a new online bookseller would become the top retailer in the country, he said, noting an “Amazon-like competitor” could be eyeing the insurance industry.

Although the big three have made massive commitments to analytics and data-driven insights, said Angelina, Progressive might have an edge. It's “hard-wired into their DNA, they've been doing it for 25 years,” he said.

Sibel agreed the quest for “innovative ways to make things better” never ends. “This drive, along with focusing on our brand, competitive prices and industry leading segmentation, have remained keys to our success,” he said. 

Advertising Advantage

The value of investing in advertising also can't be overestimated, said Shields. Geico and Progressive constantly reintroduce branding, keeping them “front and center” with the younger demographic. Long gone are the days when consumers cited a local agent when asked the name of their carrier.

Buffett said Geico will spend $1.5 billion on advertising this year to reiterate its “save 15% in 15 minutes” message. “That brand is huge, and we have to come through on the promise we give, which is to save people significant money on insurance, a great many people,” he told shareholders at the meeting.

Progressive is hard at work expanding majority-owned homeowners carrier American Strategic Insurance Corp., rebranding it Progressive Home, and seeking bundled homeowners and auto customers.

But State Farm enjoys the retention benefit bundling brings—it's not uncommon for a customer to carry six of the mutual's products between property and life lines, Angelina said.

In May, State Farm Chief Financial Officer Jon Farney said customer retention has improved as the company expanded digital services and investments in the past year.

“The essence of our very founding almost 100 years ago was innovating and adapting to customer needs and marketplace demands,” Farney said. “It is required to be relevant to customers now and in the future. In addition we are always working on new ideas and alliances.”

Berkshire Hathaway sells, but doesn't underwrite homeowners insurance—a strategy Buffett thinks is smart. The company wrote homeowners until Hurricane Andrew hit the Bahamas, Florida and Louisiana in 1992. That's when it became obvious a company could lose as much in one year as it made in the prior 25, he said at the meeting. “And the float isn't as large.”

Still, the fact State Farm is a mutual while Progressive and Berkshire Hathaway are publicly traded also comes into play, AM Best's Venezia said. “For mutual companies, the main objective is to continuously maintain enough capital to meet policyholder needs. That's different than stock insurers, whose main goal is to maximize profits for its shareholders with short-term results.”

Mutuals tend to manage their business with a longer-term view, he said.

As a mutual, State Farm doesn't distribute stockholder dividends, which, over time, has given it a significant advantage over many of its stock competitors in retaining earnings and generating surplus internally, according to the Best's Credit Report for State Farm Group. However, it does periodically distribute policyholder dividends. No significant payout was made over the past five years, according to the report.

It had a policyholder surplus of $100.78 billion, according to the Best's Rankings for U.S. Property/Casualty in 2018. The company's $65.46 billion of annual net premiums written in 2018 exceeded the combined NPW of the third- and fourth-largest U.S. property/casualty writers, Progressive and Allstate Insurance Group.

Geico's 2017 policyholder surplus grew to $29.14 billion from $21.91 billion in 2016, according to its Best's Credit Report. Progressive Insurance Group's policyholder surplus was $11.70 billion, according to the 2018 Best's Rankings.


See Best's Rankings: Top Auto Writers.


Learn More

Government Employees Insurance Company (Geico) (A.M. Best # 058381)

State Farm Group (A.M. Best # 00088)

Progressive Corporation (A.M. Best # 058454)

For ratings and other financial strength information visit


Renée Kiriluk-Hill is an associate editor, BestWeek. She can be reached at

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