2020: Will GEICO be unusually profitable this year?
BECKY QUICK: This next question is for Warren. “Do you think GEICO will experience unusually high profitability in 2020 due to the reduced amount of driving, even after giving customers a 15 percent credit?”
WARREN BUFFETT: Well, we have promised to give our customers — at GEICO, we’re the second-largest auto insurance company and — and different auto insurers are handling a sharing of the better experience with their policyholders in different ways.
We — our plan — we’ll deliver back 2 1/2 billion, roughly or so, in recognizing the reduced frequency of accidents during this period.
What we don’t know is how long this will continue. I mean, people want to drive their cars still. But conditions have reduced that driving dramatically, obviously.
Now, we have instituted a program that runs — saving people money — for six months. And so far, other people have largely been two months, but some of them have given a little more for those two months than we give per month.
Our total is the greatest at 2 1/2 billion, and —
In addition to that, we and all the others in the industry — it’s not just GEICO — we’ve also — and insurance commissioners, in many cases, I believe have required it — but we have — we give people more time to pay, if they aren’t paying. And if they cancel their policy, or if they don’t end up paying us, we’ve, in effect, given them free insurance during that period.
And the delay in payments is, obviously — increased delay of payments — if you’ve got a shopping center getting rent, it — delay in payments is what happens during a period like this. And that will be a significant cost to us. We don’t know how significant it will be.
There will be more uninsured motorists driving, and they cause a disproportionate amount of accidents, and that — so there’s a lot of variables.
We made our best guess as to what we’re going to do to reflect the current reduced accidents in our — in our premiums that we receive, really, over the next year. It applies for six months on renewals, but that — we’ll be renewing policies in October that will extend it into next April.
And so, we’ve made a guess on it , and we’ll see how it works out.