The Sacramento Bee reported that GEICO has closed all of their 38 agent offices in California. The company states it’s not leaving California and continues to write business in California through an online portal on a desktop or mobile device according to the Bee.
The California Department of Insurance is monitoring this new development as to make sure policyholders are not being shortchanged. In addition to shutting down their offices, hundreds of these California workers will be laid off or terminated.
This opens the door for independent and local captive agencies to fill in the gap of policyholders who prefer a local agency. The direct online model has not shown huge promise among the startups that have tried it as they continue to struggle with client acquisition costs and loss ratios issues.
It’s possible that GEICO has made this move in California due to the regulatory environment that makes it very difficult to use independent contractors. Currently, there is a class action lawsuit representing Farmers agents in California and it appears like the agents who agree to opt into the class action will be able to settle for very favorable terms. AgencyEquity continues to monitor these developments.