Innovation at Progressive: Pay-As- You-Go Insurance Major Case Study
The auto insurance service industry is a continually growing market with an endless number of customers looking to become insured. As a consumer of automobile insurance, I look for reliable, price sensitive, convenient, and quick service. Some of the automotive insurance industry’s service qualifiers would include offering proper coverage, reasonable costs and savings, and comprehensive attributes. Major competitors in the auto insurance market include State Farm, Allstate, GEICO, Farmers, and Progressive.
Progressive is a public auto insurer, founded in Cleveland, Ohio in 1937, that offers the services of auto insurance and property-casualty coverage. Joseph Lewis, the founder of Progressive, established an experimental approach and culture in order to simply “be better.” Progressive competes on the service winners of: * Fast service
* Convenience and 24/7 service
* Detailed segmentation (saving on rates)
* Variety of value-added services
* Information transparency
* Technological innovation
All of these service winners contribute to Progressives overall goal of superior customer service. Progressive is able to execute this goal due to the implementation of effective technologies, flow of information, and claim representatives.
Currently owning four percent market share, Progressive’s CEO Peter Lewis jokes of obtaining 100% market share but stated he’d “settle” with 25%. Progressives blatant goal is to service more customers, while focusing on the target market of lower-risk policies.
Over the years Progress has committed to excellent customer service and therefore has reaped profits in an unprofitable auto insurance industry. Progressive is the largest writer of auto insurance in the independent agency system sector with 10% market share. Progressive’s consistent duty to innovation and technological advancements has allowed Progressive to provide detailed segmentation and differentiate itself from its competitors on a cost a basis.
Progressive ability finely segment distinguished itself from competitors. Progressive utilizes sophisticated underwriting software that accounts for a plethora of factors and accurately prices risks. Most insurers price premiums based on attributes such as vehicle (age, manufacturer, and value), customer (age, gender, marital status, place of residence, driving record), and customer history based on zip codes to establish risks. “Progressive’s software accounts for correlations between drivers, 12 vehicle characteristics, risk, and 16 variables in a credit-scoring model.”
Aside from segmentation, Progressive differentiates itself from competitors by challenging and empowering employees to responsibly innovate. Two of Progressive’s value added services include the Immediate Response (IR) and the Comparison Quotes (CQ).
In response to Proposition 103, Progressive launched Immediate Response which offered faster service to customers. With the help of wireless technology, the Immediate Response service operated 24 hours per day and was able to incorporate an Immediate Response Vehicle (IRV) service. (Appendix A provides a process flow of the IRV service.) The implementation of the IR service resulted in an increase in: the claim turnaround, the number of customers, the number of customers that reported claims within 24 hours, and the number of claim representatives. Due to the increase in claim representatives, Progressive experienced lower claim handling quality and increased loss costs.
Comparison Quotes “provided prospective customers who called Progressive’s toll free number with rates from Progressive and up to three competitors. Progressive implemented the Comparison Quotes service in order to proved consumer with information transparency. In accordance with the Comparison Quotes service, Progressive’s website went...
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