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Employees called key to GEICO success

By Jonathan D. Epstein

February 2, 2011, 8:02 AM

A company's brand and reputation are among its most valuable assets, but they're only as good as the service provided to customers by its employees, the head of auto insurer GEICO Corp. said Wednesday evening in Cheektowaga.

That's especially true in a highly competitive industry like auto insurance, with 1,100 carriers nationwide, and about a dozen advertising on television on any given night, said Olza M. "Tony" Nicely, chairman and CEO of the nation's third largest auto insurance carrier.

Whether we like it or not, we sell a commodity. We're out there trying to please people," said Nicely, the keynote speaker for The Buffalo News' 19th annual Prospectus launch event. "The sole source of opportunity in any organization. ... The only thing that will make GEICO successful, is if we have dedicated employees serving our customers."

And that's why the company puts such a priority on hiring and promoting its employees, and why it has been so happy with its Northeast Operations Center that it brought to Amherst in 2004. The facility is located in Uniland Development Co.'s CrossPoint Business Park.

"We've been here seven years now, and we are delighted," Nicely said, citing the intense lobbying by Buffalo News Publisher Stan Lipsey over several years to get the company to locate an operation in Western New York. "We have exceeded all our expectations, and you have welcomed us with open arms."

Both GEICO and The Buffalo News are owned by Warren Buffett's Berkshire Hathaway, and Buffett is the newspaper's chairman.

Today, the 75-year-old company has 1,942 employees in Western New York, out of the 2,500 it originally projected as the capacity for the site. The vast majority are from the local area. It recently announced plans to hire 300 more, and already hired 61 of them in January.

"We will get to that 300 pretty fast," he said.

The operation handles sales, customer service and claims for New Jersey and Massachusetts, as well as other parts of New England, but those two states have been the source of much of the company's recent growth.

The facility also includes one of two locations for GEICO, which sells other types of insurance to customers, even underwritten by its competitors. That division was expected to add 300 jobs over three years, but has already hired 242, Nicely said in an interview.

Last year, the company added 801 jobs nationwide, of which 347 were in Amherst, "and we have 11 other major locations," Nicely said.

"That's the greatest testimony to the Buffalo work force and how we think things are going here," he said in the interview. "We're almost a shoe-in [to reach 2,500 here], but I don't take anything for granted."

Indeed, he HAS learned that from the struggles he witnessed at GEICO, as the brand and reputation the company worked so hard to build were seriously harmed after the company nearly went bankrupt in the late 1970s. It was so under-reserved for losses, Nicely said, that had regulators known the true condition, the company would have been shut down.

But while the company was saved from disaster -- through support from Buffett, its rivals, its regulators and the one Wall Street brokerage that went to bat for it, Salomon Brothers -- it has taken more than three decades to repair the damage that was done among customers, shareholders and investors.

The company lost some 1 million customers and more than 4,500 jobs after financial struggles and concerns over its viability forced it to pull out of New Jersey and Massachusetts, while three other states directed it to cut back.

"We are still working on getting back that reputation, and it's been 30 years," he said. "But I would say we couldn't have done it without the people of GEICO."

The one area where he wishes the company were doing better locally is its market share. Geico today has 10.1 million policyholders and insures 17 million vehicles, ranking it third in the nation. It has about 9 percent of the market nationwide, so it has a "pretty lucrative" opportunity to grow.

But it's the No. 1 insurer in New York State, and has about 30 percent of the market downstate -- even 40 percent in a couple of New York City boroughs. Yet, it has less than 10 percent in Western New York. "We have got to work really, really hard," he said. "It's our fault. We have not been as aggressive."

jepstein@buffnews.com