GEICO Insurance: Best No1 Government Employees Insurance Company

In the United States, Government Employees Insurance Company (GEICO Insurance) is the second largest auto insurance company after State Farm. It is headquartered in Chevy Chase, Maryland. In 2017, GEICO insured over 24 million motor vehicles owned by more than 15 million policyholders. GEICO is a wholly owned subsidiary of Berkshire Hathaway (Berkshire Hathaway is a massive holding company that’s been run by famed value investor Warren Buffett since the 1960s).

GEICO writes private passenger automobile insurance in every U.S. state and the District of Columbia. Through local agents called GEICO Field Representatives, licensed insurance agents, and their website, the insurance agency sells policies directly to consumers. Jake Wood voices a gold dust day gecko with a Cockney accent as its mascot.

Despite the presence of the word “government” in its name, GEICO has always been a private corporation and not a government agency. In 1936, Leo Goodwin Sr. and his wife Lillian Goodwin founded the company to sell auto insurance to federal government employees. GEICO also offers property insurance, as well as umbrella coverage which GEICO sells, but the risk is transferred to third parties. Property and umbrella policies are handled by a separate customer care team, and GEICO manages the policies as the “insurance agent.”

History of GEICO

GEICO Insurance was formed in 1936 by Leo Goodwin Sr. and his wife, Lillian Goodwin. Goodwin had worked for USAA, an insurer that 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. The Goodwins funded the creation of GEICO with $25,000 of their own money and $75,000 from Fort Worth, Texas-based banker Cleaves Rhea. 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 compared to the general public.

After realizing their business model would work best in the place with the highest concentration of federal employees, the Goodwins moved GEICO from San Antonio, Texas, to Washington, D.C., and reincorporated the company as a D.C. corporation. In 1948, the Rhea family sold its 75% stake in GEICO to a coalition of investors, led by Benjamin Graham’s Graham-Newman Partnership. This sale accidentally violated an SEC regulation, which forced Graham-Newman to divest a portion of their holdings in 1949, resulting in GEICO becoming a publicly traded company at ~$27/share. Graham-Newman’s investment in GEICO eventually resulted in a position worth $400 million by 1972, which was by far Graham-Newman’s best investment and outperformed the rest of their portfolio combined.

From 1948 to 1958, GEICO’s market capitalization grew nearly 50 times. Warren Buffett, then a Columbia University graduate student under Benjamin Graham, named GEICO “The Security I Like Best.” In 1958, Goodwin retired and was succeeded by Lorimer Davidson, who grew the company’s insurance premiums at a compound rate of 16% annually from $40 million to $250 million. In 1970, Ralph Peck (President and COO) and David Lloyd Kreeger (Chairman and CEO), two of the company’s other investors, replaced Davidson.

In 1974, when computerized driving records were available throughout the United States, GEICO began to insure the general public. At this time, GEICO was briefly the fifth-largest U.S. auto insurer. By 1975, it was clear that GEICO had expanded far too rapidly (during the 1973–75 recession) and reported a US$126.5 million loss. In order to prevent GEICO from collapsing, a consortium of 45 insurance companies agreed to take over a quarter of its policies, and it was forced to issue a stock offering, thus diluting existing stockholders. It took five years – during which the company shrank significantly – and a massive reorganization led by John J. Byrne and supported substantially by Buffett, to set GEICO on the path to recovery. Alvin E. Krause, retired from GEICO, was given carte blanche by the directors to help bring about a wholesale reorganization of GEICO’s underwriting operations – including promotions and dismissals. He helped nurse the insurance firm back to financial health. He was a director of the GEICO Corp. from 1978 to 1983 and was an honorary director at the time of his death. He was chairman of Criterion from 1978 to 1981.

GEICO’s Involvement in motorsport sponsorship

GEICO has a long history of sponsoring motorsports teams. Since 2008, the company has sponsored the Germain Racing team in NASCAR Nationwide and Cup Series racing. In 2020, GEICO became a premier partner of NASCAR, sharing title sponsorship rights with Busch Beer, Coca-Cola, and Xfinity. Germain and GEICO split at the end of 2020, but the spring NCS race at Talladega is still sponsored by them. GEICO also sponsors Joe Eder and his Super Modified tractor in the PPL.

Types of Vehicle Insurance Policies In GEICO:

1. Auto Insurance
2. Motorcycle Insurance
3. ATV Insurance
4. RV Insurance
5. Boat/PWC Insurance
6. Collector Auto Insurance
7. Mexico Auto Insurance

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