GEICO Life Insurance Company Review
With its high-profile ownership and aggressive marketing, GEICO has become a major player in the property and casualty insurance industry in the past decade. However, despite its cavemen and lizards it is not a player in life insurance. As a matter of fact there is no such thing as “GEICO Life Insurance,” at least not by that name.
GEICO holds the top rating from A. M. Best for financial strength: the A++. This rating is reserved for a select few large insurance companies with superior financial strength. GEICO also holds an Aa1 rating from Moody’s and an AA+ from Standard and Poor’s, both also outstanding ratings.
History and Structure
GEICO was founded as the Government Employees Insurance Company by Leo Goodwin in 1936. The company originally marketed insurance strictly to government employees and the military. Goodwin previously worked at United Services Automobile Association (USAA), which pioneered insurance marketing to military personnel. The company was originally headquartered in Washington, D.C.
In 1948, a group of investors led by David Lloyd Kreeger bought the privately-held company (which despite its name has never been a government agency). GEICO went public later that year. By 1964, Kreeger had become the company’s president. Under Kreeger’s leadership GEICO began selling auto insurance policies to the general public for the first time and briefly cracked the top five among American property-casualty insurers. However GEICO was hit hard by the recession of the mid 1970s and barely survived the decade. The company limped by after a group of competitors agreed to take over a significant part of its book of business.
GEICO became a full subsidiary of the Omaha, Nebraska-based Berkshire Hathaway in 1996. Headed by noted investor Warren Buffett, Berkshire Hathaway is a holding company with an eclectic mix of subsidiary companies, ranging from insurance underwriters to candy makers to furniture stores.
GEICO, one of several insurance companies owned by Berkshire Hathaway, is arguably the holding company’s highest-profile asset. Since Berkshire Hathaway acquired GEICO, the company has concentrated almost exclusively on the auto insurance market and has been very heavily advertised. In recent years while even its largest competitors have run one marketing campaign at a time, GEICO has run several separate nationwide marketing campaigns simultaneously,
Today Berkshire Hathaway’s insurance companies collectively are the third largest auto insurer in the country in terms of market share, trailing only State Farm and Allstate. GEICO has driven much of that growth.
A GEICO life insurance company did exist at one time, the Government Employees Life Insurance Company, or GELICO. However, GELICO was sold in 1981 and became the independent Banner Life Insurance Company. Garden State Life Insurance Company was also a GEICO subsidiary at one time, but that company was bought by the Texas-based American National Insurance Company in the 1990s.
Most of Berkshire Hathaway’s other insurance interests are in the property-casualty and reinsurance fields. However, the company does operate a life insurance company with a modest product line, the Berkshire Hathaway Life Insurance Company of Nebraska.
GEICO’s corporate headquarters are in the Washington, D.C. suburb of Chevy Chase, Maryland. Since coming under the control of Berkshire Hathaway GEICO has employed a direct marketing philosophy instead of a traditional agency sales force. While the company offers many different lines of insurance on its web site, including life insurance, apart from its auto insurance these products are issued by other insurers. GEICO therefore operates as an insurance broker for these lines. Since the company does not offer variable life insurance products, it does not have a broker/dealer.
The following product discussions are intended to be a generic representation of the policies GEICO Life Insurance offers. Not all products may be available in every state as described. In addition policy features and underwriting requirements may change without notice. Consult with a GEICO Life Insurance agent for the most up-to-date information.
GEICO life insurance as such is not issued by GEICO. The company instead provides its customers with a free online life insurance quote through the Darien, Illinois-based Life Quotes, Inc., which then quotes life insurance offered by other companies. Available companies from Life Quotes include MetLife, Prudential, Transamerica Life Insurance Company and several others. Both GEICO and Life Quotes recommend one purchases life insurance only from companies with an A rating or better from A. M. Best
While GEICO does not underwrite any of this life insurance business, it does provide support for policies issued through its web site. Only quotes on term life insurance are available from GEICO and Life Quotes.
Annuities and Other Products
Although neither GEICO nor Berkshire Hathaway’s other companies offer permanent life insurance products, another Berkshire Hathaway subsidiary, Berkshire Hathaway Life Insurance Company of Nebraska, offers two fixed immediate annuity policies. Like GEICO, Berkshire Hathaway Life Insurance Company of Nebraska holds the top A++ rating from A. M. Best. In New York state the annuities are issued by First Berkshire Hathaway Life Insurance Company. Like GEICO, Berkshire Hathaway Life Insurance Company of Nebraska is marketed directly online at its web site.
Berkshire Hathaway Life Insurance Company of Nebraska’s single premium deferred annuity offers a fixed or adjustable interest crediting option and is available as a qualified or non-qualified plan. Since it is a deferred annuity, the plan is designed to begin its distribution phase at age 59 ½ or 10 years after policy issuance, whichever comes last.
The plan is funded by a single substantial payment of at least $40,000 and designed to provide a monthly income that will not outlive the policy owner. The fixed interest rate is based on the U.S. Treasury Strip Rate. The plan is only available in 26 states and the District of Columbia. Consult the Berkshire Hathaway Life Insurance Company of Nebraska web site for more information.
The Berkshire Hathaway Life Insurance Company of Nebraska single premium immediate annuity (SPIA) operates in a similar manner to the single premium deferred annuity, however it is designed to begin distributions immediately. The SPIA is available as an individual plan or as a joint and survivor plan, which provides income for life to both the annuitant and a spouse. It can also be purchased as a qualified or non-qualified plan.
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