Innovation at Progressive Case
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INNOVATION AT PROGRESSIVE CASE (A): PAY-AS-YOU-GO INSURANCE
Autograph: Non-traditional method of calculating premium for auto-cars (Pay-as-you-go)
Used GPS technology instead of regular metrics
18 month Texas pilot – drawing positive response
From pilot (1100 cars) to national level
Whether should be launched in few states before going national?
Worried that Progressive was losing sight of the insurance business – technology
Progressive Group:
Founded in 1937, Cleveland, Ohio – Joseph Lewis
Started out as a maverick company
1956 – Company wrote insurance for high-risk drivers (20 % of insurance market)
1971 – Company went public, moved headquarters to Mayfield Village , Ohio
1987 – $1 billion in premiums
P/C insurance industry dominated by handful of companies (State Farm Group , Allstate Corporation – 1/5th of the market)
Insurance Business
Revenues:
Set aside portion of premiums collected from policy holders to cover losses ( Earned premiums) – primary source of revenues
Second source of revenue: Revenues from Investment income
Expenses:
Commissions paid to agents and salespeople
Under-writing related expenses (salaried staff)
Auto liability and auto damage accounted for 40 % of the premiums written
Auto insurance: Dedicated companies, Single companies and telephone and internet
Progressive wrote 80% of the insurances through independent agency system
Auto insurance premiums were initially rated on attributes of vehicle, customer, coverage and type of deductibles selected. Used to arrive at a driver -vehicle class and loss experience with the class to determine the rate.

Formation of Progressive Casualty Insurance Company
Quick to become dominant player
Strength lay in segmenting customer base
New ways to use information to segment prices – data mining and extensive statistical analysis
Example of moving violation ( Failure to Yield v/s speeding)
Advanced software – looked for correlations between drivers, 12 vehicle characteristics, risk and 16 variables in credit scoring model.
In 1993, after growth in non-standard drivers leveled moved to standard and low-risk sectors.
1995-1999 – became half of the business
Proposition 103 was passed in 1988, referendum designed to regulate auto insurance companies and roll back escalating rates – company paid out $60 million in refunds. Progressive reduced their workforce by 19%.

Immediate Response
Major innovation : Implementation of fast service
Faster – better service
Faster to the losses – Less the lawyers get
Two years after Proposition 103 – round the clock service – Immediate response – handled claims 24 hrs. a day – received skepticism from employees
1994 – Immediate response vehicle – Ford Van
Call 800 number – >Telephone agent -> Took down the information -> handed claim to one of 350 local claims offices (centralized database) -> office sent one of 1400 IRV vans along with a claims representative who did claim processing wirelessly

Claim handling – experience based assignment
Hire the best – pay the most
For Immediate response to work customers had to report claims timely – Claims reporting Index , Gold Card
Claim Representatives 3093 to

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Auto-Cars And New Ways. (June 8, 2021). Retrieved from https://www.freeessays.education/auto-cars-and-new-ways-essay/