Wealth Secrets: Warren Buffett’s Public Subsidy

buffett The Province of British Columbia provides its residents the ability to buy public, not-for-profit automobile insurance.

In the United States, where public insurance is more aggressively opposed by the overclass, publicly provided automotive coverage is entirely unavailable.  Consequently, the insurance is inferior and the premiums higher.  And the record profits of U.S. insurance companies, which Advertising Age reports “reached $26.7 billion in the first nine months of 2010” — where do those go?

Largely to folks like Warren Buffett, whose Berkshire Hathaway empire owns Geico.

The basis for all those private-sector profits?  Sheer waste:  To promote brand awareness, Geico and its “competitors” engage in saturation advertising of their private monopoly-protected inferior product.  According to Ad Age, advertising expenditure by insurers more than doubled between 2000 and 2009.

The overall sales strategy in pure Pavlov.  With few differences between companies’ policies and no competition from the public sector, repetition-implanted name recall is everything:

[T]he average shopper can name just four insurance brands off the top of their head, according to J.D. Power. And the way to get on that list is to advertise — all the time. “There’s enormous overlap between the companies that advertise a lot and the companies that are growing faster,” Mr. Shields said. “It seems very much to work.” (Ad Age, February 21, 2011)

Such are the glorious “efficiencies” of capitalism.