GEICO's Tech Upgrade Cuts Claims Costs by 2024
1min read Berkshire Hathaway's Vice Chairman Ajit Jain recently announced that the company's auto insurance subsidiary, GEICO, has made significant strides in upgrading its technology to better assess risk and set premiums. Jain, who oversees the day-to-day management of Berkshire's insurance operations, made these remarks during the annual meeting held in Omaha, Nebraska, alongside Chairman Warren Buffett and Vice Chairman Greg Abel.
Ask Aime: What impact will GEICO's technology upgrades have on the auto insurance industry and Berkshire Hathaway's overall investment strategy?
In 2024, GEICO's performance showed marked improvement, as the company managed to control the issuance of new policies while reducing the percentage of premiums used to pay for accident claims. Jain highlighted that GEICO has made "rapid progress" in the field of connected car technology, stating that its current technological capabilities are "on par with any competitor." He praised CEO Todd Combs for successfully streamlining the company's structure, noting that GEICO had eliminated over 2,300 positions in the previous year.
"These measures have made GEICO a more competitive player," Jain stated, but he cautioned that declaring "mission accomplished" would be premature. "We have achieved a lot, but there is still much work to be done," he added.
During the 2023 annual meeting, Jain had pointed out that GEICO lagged behind in the area of connected car technology, which uses in-vehicle devices to monitor speed, braking, mileage, and distracted driving behaviors such as phone use. Insurance companies use this data to offer discounts to safe drivers and set appropriate premiums for different driving behaviors.
By the 2024 annual meeting, Jain acknowledged that GEICO was still "playing catch-up," but he anticipated that by the end of 2025, the company would surpass its competitors in data analytics, including risk pricing. However, he emphasized that GEICO's operating costs remain "significantly lower than almost all of its peers."
