No. of Recommendations: 7
Any idea what it will take Geico to fix their legacy computer problems?I would rephrase the question: what will it take for Geico to fix their underwriting problems? More specifically, to fix the precision of their pricing of policies.
They were slow to recognize that in-car information which it is now easy to collect can be very valuable in terms of setting the premium which can be expected to be profitable for a given customer. As a result, despite having low costs (because they have no dealer network, making them very profitable on the EXPENSE side), they tend to misprice premiums, and so do poorly on the DAMAGES side.
Jain has said that they have recognized this problem now and are investing in the solution, but I have no idea how long that might take. Intuitively, I would think that it should be fixable in a few years, but because they are way behind Progressive, they may find that the customers who are low-risk and prepared to prove it by being spied on in their own car have already gone to Progressive, and GEICO is stuck with higher risk customers (who might leave if they were offerred the higher premiums they deserve) plus the low-risk customers who haven't left already because they DON'T want to be spied on. Getting them to accept flight recorders in their cabins may be tougher than if you are the early adopter doing it.
Maybe this is why we see GEICO losing policies in force while Progressive is gaining:
https://www.spglobal.com/marketintelligence/en/new...dtb
