Has Buffett's GEICO hit the limit to online growth?


The head of Allstate's (ALL) auto insurance unit thinks he made Warren Buffett blink. Bloomberg News reports that Allstate is bragging because Buffett's GEICO -- the third largest auto insurer (behind Allstate) which sells over the Internet and telephone -- has decided it needs to open storefronts to sustain its growth.

I was pleased when GEICO decided to sell auto insurance online. Back in 1995, I pitched the idea of starting up a company that would do just that to a Boston private equity firm. The reason is that about 25 cents of every dollar of insurance premium goes to paying insurance agents. I thought that selling insurance online would cut out a huge portion of that cost, thus leaving room to reduce prices to gain market share.