Progressive case study

Peter Lewis former CEO said, “We are not in the business of auto insurance. We’re in the business of reducing the human trauma and economic costs of automobile accidents—in effective and profitable way.” He had a vision for Progressive, and thanks to his innovative and efficient way of thinking he has grown progressive from being a small insurance company from Ohio owned by his father, to the number three player in the insurance industry, raking in more than 15 billion in revenue. They achieved this competitive advantage by creating immediate response, data mining, detailed research on specific drivers, standard and preferred auto insurance, express quotes, use of the internet, and a heavy recruiting process. This new and innovative approach to a dull and boring industry created value to policyholders.
Porter described the approach to a business strategy as five competitive forces. Bargaining power of suppliers, Rivalry among existing competitors, threat of new entrants, threat of a substitute services, and bargaining power of buyers. Progressive is affected directly by these competitive factors. The first being rivalry among competitors. Progressive has three other competitors that they are constantly clashing for market share, which are Allstate, State Farm, and Geico. State Farm, with pretax operating profit of $3.5 billion (2006) and an A++(superior) rating from industry rater A.M., is number one in the personal auto insurance industry with a market share of 18%. Allstate, with $7.2 billion in pretax income and a 90% renewal ratio (2006), has become the second largest player in both personal auto and homeowners industry with an 11-12% market share. Lastly, GEICO, with a 11.1 billion dollars in earned premium and the highest rating in the industry for financial strength and claim-paying ability, is number four in the personal auto insurer with 6.7% market share in 2006. Progressive has challenged these three companies by creating more innovative approaches