Insurance Ads: Trick or Treat?

Remember that ad…? Of course you do, because even when you think advertising isn’t having an effect on you, it is. The fact that you remember the Taco Bell Chihuahua or the Old Spice guy is proof that television ads, at the very least, take up some space in your memory. Making a brand or product memorable by associating it with a character such as The Most Interesting Man in the World is only one of a commercial’s goals, but it doesn’t end with brand awareness.

Some commercials are intended to influence your immediate behavior. These are easier to spot because they include clear calls to action: “Order today! Call now! Call in the next hour and receive a special gift!” Ads that create an imperative can include more than just picking up the phone or going online. “Hurry in while supplies last!” and “These deals won’t last long!” are examples of ads that motivate viewers to do something — i.e., “Buy something!”

Ads for insurance companies don’t fit into these first two categories because insurance is not something you can buy on an impulse. It’s not a product you can rush out to buy because it’s on sale. When it comes to insurance advertising, being memorable is not enough. While the goal of insurance advertising is the same as other advertising — to generate a sale — it takes some different routes to get there.

Unlike other products, the quality of insurance is intangible. It has potential value, but nothing you can or even want to touch. The value of insurance is delivered at a later date, which means that by the time you use it, unlike a bad meal or a sweater that doesn’t fit, there is nothing you can do about your purchase. This is why it’s important to understand what insurance ads are saying and how they work, so your insurance purchases will be based on your best interests and not the contents of an ad.

Weasel Words

Federal truth in advertising law says that ads cannot be deceptive or misleading. While that sounds straightforward, it’s not always that simple. Deceptive and misleading means untrue or demonstrably false, and the test of that standard comes from careful examination of the advertising claim. Advertisers know the rules and lawyers scrutinize ads to make sure they comply. However, what the law does not protect against are misunderstandings on the part of consumers.

An illustration of what constitutes a misunderstanding is a T-shirt that is popular with high school boys. It features an image of an oversized pen. The text reads “My Pen is Large!” The casual reader may be offended because they read it as “My Penis Large,” but the shirt is perfectly acceptable because there is nothing wrong with a shirt about writing implements of any size. In the world of advertising regulation, the wearer of the shirt is not responsible for the misreading of the clearly spelled-out message.

Advertisers do something similar with what the ad industry calls weasel words. Weasel words can make a claim sound like one thing to a casual listener when in reality they mean something else or nothing at all. Biggest, best, better, and greatest are common weasel words that, when combined with other words, sound important.

For example, “readers of this column think I’m the greatest writer ever.” That’s not only a bold claim, it’s also true — my friends and family who read this column think I am the greatest. Because the statement does not specify all readers, there is no deception.

What are They Really Selling?

Whether it’s Maxwell the Pig for GEICO, Flo from Progressive, Professor Nathaniel Burke of the University of Farmers, or some other fictional spokes-character, they all have something in common: We like them.

Flo is a mildly awkward, overly enthusiastic employee who loves her job because she works for the best insurance company in the world. The fictional Farmer’s University professor is an amalgamation of all our favorite teachers — knowledgeable, patient, and sincerely interested in helping us learn something new.

The first thing they all sell is their own likability. The more consumers identify with a character, the more we see of ourselves in them, the more we trust them and what they say. Once trust is established, everything the character says or implies is accepted as factual and truthful. This is why insurance commercial characters seldom sell products; they sell themselves and recommend products.

The Other Guys

Bashing the competition may work for selling used cars, but it doesn’t work for insurance. That doesn’t mean insurance ads don’t go after the competition. They just do it indirectly, which has the benefit of addressing multiple competitors at the same time.

Allstate and their online sister brand Esurance are masters of taking down the competition without ever mentioning names. Allstate’s “Mayhem” commercials are like mini movies with fully developed story lines and a moral. They open with Mayhem identifying himself as a person, thing, or animal poised for action — or inaction, as is the case of the guard dog eating a bone while burglars pack up household possessions.

They use dark humor to not-so-subtly point out that no matter how well you plan, things can and will go wrong. It’s only a matter of time until mayhem strikes. Even the expected — like childbirth, which gives you nine months of advanced warning — can lead to the unexpected. The over-the-top dramatizations are like nightmares come to life. The spots finish with the dire warning, “If you have cut-rate insurance, you might not be protected from Mayhem.” Two messages are being delivered: All other insurance is cut-rate, and Allstate is worth its higher price because it protects you better.

Allstate’s partner brand Esurance takes the exact opposite tack with their highly creative commercials featuring a cadre of memorable characters, such as Beatrice the Facebook lady and Milton the copy machine selfie guy. The message they send is obvious: If you’re using some other insurance company, you’re spending twice as much time as you have to and you’re paying too much.

The Esurance ads also present a more subtle message — that only people who are out of touch would buy insurance from someone else. This taps the same psychology that made you ditch your best friend in 7th grade because the cool kids said he was lame.

Allstate and Esurance are one company with two directly opposing approaches — and no matter which one appeals to you, they win.

The Comparison

A popular feature of insurance commercials is the rate comparison. Consider the 21st Century commercials that start out damaging a car and correctly point out that insurance is insurance and both companies will pay for the needed repairs. The difference is that 21st Century is going to cost you less for the same protection, so says the guy in the hard hat. They are telling the truth; the rates they flash on the screen are real. They just may not be accurate!

Insurance rate commercial ads, including Progressive’s price comparison tool, all work the same way. Insurance companies are required by each state’s insurance department to provide their rate books to the state. These books then become public records that can be searched by anyone, including competitors.

The problem is that rate books tell only part of the story; they are baseline rates and do not include underwriting or discounts. When ads compare rates, they will commonly cite the book rates of their competitors and underwritten rates for themselves. The result is that their rates always appear to be lower.

Beware the Disclaimer

Rate comparison commercials will always have a disclaimer in them. Disclaimers are those messages that run in nearly-too-small-to-read print at the bottom of a commercial, and they appear that way for good reason. What the spokesperson or large text gives, the disclaimer takes away. In the case of the 21st Century ads, it’s the savings. “Actual savings may vary,” says the disclaimer.

When Progressive’s perpetually perky spokesperson Flo fires up the price comparison board in this commercial for bundled coverage and assures the customer that “Progressive compares rates with other top companies so you get a great price,” a couple of sneaky things happen.

First, she doesn’t actually say Progressive is less expensive, even though that’s what appears on the board. Flo uses the weasel word “great” to describe the rate. In this case a great rate can mean anything or nothing. The next gotcha is the white text with a faint black shadow on the white background that says “Comparison rates not available in all states or situations.” In plain English, the disclaimer is saying the rates shown may not apply to you.

How important are the disclaimers? In the Progressive commercial for auto-homeowner bundles the disclaimer is the only place you are told that Progressive doesn’t sell homeowners insurance. The disclaimer says, “Home insurance provided and serviced by third-party insurers” — and, by the way, these “great” rates are only for six months. Later in the commercial, a disclaimer lists the actual companies that may or may not be providing your insurance.

Gimmicks Galore

Gimmicks are tricks that are used to draw your attention away from where it needs to be. Magicians use all sorts of gimmicks — which they call misdirection — so you won’t see something that might give away the illusion. Insurance commercials do the same thing. They use offers designed to distract you from the fact that you might not really be getting the best price for insurance.

Allstate puts two different distractions in this auto insurance commercial. The first bit of advertising slight of hand takes the form of their deal with TrueCar for new car discounts. Misdirection is everywhere, starting with the claim that you can “save an average of $3,000.” This, depending on how they calculate the average, probably means you’ll save $3,000 at most.

A savings on what is the real question? The small print next to the third zero gives us the answer: The savings are based on MSRP.

MSRP is the Manufacturer’s Suggested Retail Price, or the sticker price. When was the last time you heard of someone paying the sticker price for a new car? In most cases even the most timid negotiator is going to pay at least $1,000 less than MSRP, with the average buyer paying about $3,000 less.

You don’t need Allstate or any other insurance company to get these savings. If you’re not comfortable negotiating and really like the idea of a discount deal, check your warehouse club membership; Sam’s, Costco, and BJ’s all offer similar programs as part of your membership.

The next misdirection in this ad? Safe driving bonus checks. They’ll reward you for not having an accident by sending you a check.

The gimmick here is that you start out paying a higher rate, and they refund you the overpayment if you don’t have an accident. In essence, they’ll give you back your money and expect you to say thank you for the favor. Of course, there is a disclaimer here, too, that informs you that the offer is NOT AVAILABLE IN EVERY STATE.

Esurance, State Farm, and USAA also offer similar car-buying services and back-end discounts.

Optional Coverage

When you shop for a car it’s common knowledge that options like power windows and heated seats come at an additional cost. The same is true for insurance. Optional coverage means it costs more even though they won’t say it in the commercials.

Take Liberty Mutual’s Better Car Replacement program, which will pay for a replacement car that is a model year newer than your old one. If you don’t go blind trying to read the tiny white disclaimer on the bright yellow background, you’ll see that in addition to being optional, it’s not available in North Carolina and deductibles apply.

Plus your car has to be totaled in order to collect. Totaled means that if your $20,000 car has $19,000 worth of damage you don’t get paid for a newer car. Liberty Mutual’s Accident Forgiveness is another example of optional coverage that offers little more than higher rates. Like Allstate’s Safe Driver’s Bonus Check, you are paying a higher rate to start with, and they’ll refund you the overpayment if you don’t have an accident.

Bait and Switch

State Farm implies that they will find money for you when you need it — delivered by a teleporting company representative. They call it their Double Check Discount.

In the commercial, a couple of friends are out shopping. The State Farm customer, after summoning an agent by singing the company’s famous jingle, receives a wad of cash to shop with. After she gets her magic money, it’s her friend’s turn — she clumsily tries calling for her insurance company and gets teased with “about” $149 less than her State Farm customer friend.

Of course, the tag line reminds us all that, “Having insurance isn’t the same as having State Farm.” That sentiment is unmistakable at the end, when the voiceover tells you that State Farm is there to help you with unexpected savings. The message — that there’s no reason to shop around, and that ordinary insurance companies lure you with rates that aren’t as good as State Farm’s — is as plain as the dollar bill dangling in front of your face.

Once again, watch for the disclaimer that tells you not to pay attention to what the nice young man is saying.

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