Innovation at Progressive - Pay-As-You-Go Insurance

Innovation at Progressive: Pay-As-You-Go Insurance.

Prepared for

Dr. Venkat Venkateswaran

Prepared by

Anna Kavalchuk

MGT-4366

02/07/2017

1. How does Progressive's performance as an auto insurer compare to that of typical insurance

companies? How has its performance changed over time? What explains the difference in

performance?

Progressive is an auto insurance company, which is performing better that their competitors in the auto

insurance industry and the property-causality insurance industry. In the period between 1990 and 1999 their

growth rate of net premiums earned was always higher that this of the competition. As we can see, the industry

grows between 3 and 7%. The average is around 5%. Progressive on the country continuously improves the

years after 1990 with 8% in 1991 and 11% in 1992, 24% in 1993 and 36% in 1994. After 1994 Progressive’s

change in earned premiums dropped to 11% and increased again in 1997 to 39%. The average growth rate

based on net premiums earned is approximately 20% in the given period. This is an average of 15% better

performance than the completion.

These performance differences are due to a different strategy in Progressive’s business. Progressive has

ambitious goals and uses various tools to reach those. They define themselves by competencies and

investments in the right assets. Traditionally the competitors searched for and investments in the right assets.

Progressive started in 1956 to insure non-standard drivers with high risks and could grow to become the

market leader in this category of their fine risk calculation and customer segmentation. They use very

extensive software to get unique customer segmentation based on advances in technology, data mining,

different information sources and statistical analysis. Next to good software and information resources they

also invest in the best sales representatives. Progressive claims in the case that they “hire the best” and “pay

the most”. People that had been hired based on performance and experiences. Senior employees handle more

complicated claims, whereas beginners handle ones without any serious damages. I believe that the most

important decision was to be a customer centric organization, it has a good impact on both company and their