Innovation: Pay-As-You-Go Insurance

Outline
Progressive Company and History

Innovations
Autograph

Future

Progressive Short Overview

Auto insurer founded 1937 was the first insurer
o to enter the high risk market o offered high service for customer

does things different compare to other insurer when setting a premium

o price (on finer level) o drivers history o continuously search of new opportunities

History
1937 Joseph Lewis founded Progressive Insurance Industry in Cleveland, Ohio offering drive-in claims service with the ability of customers to pay over

time
1956 Progressive started to write auto insurance for high risk drivers and became dominant player

History
1988 Son of Lewis, became the CEO and got the idea of dealing with insurance in a more innovative way The next years Progressive achieved in technology introducing: IMMEDIATE RESPONSE SERVICE available 24/7 1993 Give Comparison Quotes to people

Reasons for Differentiation

Proposition 103 in California 1988
It was the best thing that happened to this company(...)I decided from then on, anything we did had to be good for the consumer or we weren't going to do it. (Lewis 1988)

Reasons for Differentiation

Innovation culture of the company
Looking for opportunities to do things different and new (Founder: Joseph Lewis)

Innovations
fast reliable service with high educated staff, which was highly paid could now compete with the big opposition like

Allstate and State Farm

higher goals with sophisticated staff and ideas always venturesome

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Information Transparency
Customers: very price sensitive High costs for workforce Preposition103 Customer Orientation Reducing workforce Increasing direct sales Comparison Quotes Website

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Customer Segmentation
Different sources/variables into calculation More detailed risk estimation Extensive and state-of-the-art software

Competitor with lower rate higher risk of losses

High satisfaction with Immediate Response Fast service

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Autograph
High-tech method for calculating auto insurance premiums on a pay-as-you-go basis. When and how much a vehicle was driven
GPS satellites Mapping technology Internal computer

Tracking mileage, time of day and where driving occurred. Example: A mile driven at 2 a.m. was four or five times more expensive than one driven at 7 a.m.
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Autograph Market Test: Houston (1998) Texas State (1999)

COST

$ 500 per vehicle

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Progressive Customers
Premium Calculation
25%

Autograph
75%

Traditional

Drivers who signed up for Autograph were offered:

Theft recovery Remote door unlocking Travel directions Low-battery detection Emergency assistance help

1.100 policyholders

Using autograph, consumers are paying 25% less than traditional products... Does Autograph offer a competitive advantage?
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Barriers to Consumer Acceptance

Yes

No

Higher Premiums for consumers who commute at night Monthly fee for the additional set of services (GPSbased)

Cost of installing GPS transponder, cellular system , etc.

Lack of privacy Focus on new technologies, losing sight of the insurance business
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Final Decision

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Advantages
market shares and global market company's reputation

Customers increase
first-mover advantage

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Disadvantages
high costs and less reward approval from each state

Time duration
high risk potential liquidity issue

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Solution
Do Not expand right away!!! time for research

stay in Texas and expand slowly

bigger cities only

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Thank you!

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Images
Alphamen (2012). Decision Making. Retrieved Nov 18, 2012 from http://alpha-men.net/wp-content/uploads/2012/01/decisionmaking.jpg Allen Kleine Deters (2011). Do You Ask Good Questions?. Retrieved Nov 18, 2012 from http://allenkleinedeters.wordpress.com/2011/11/28/do-you-askgood-questions/. PORHOMME (2008). Insurance companies want to track us by GPS. Retrieved Nov 18, 2012 from http://www.porhomme.com/2008/09/wtf-insurance-companieswant-to-track-us-by-gps/. Progressive Insurance (2006). Progressive Headquarters Sign. Retrieved Nov 18,2012 from http://www.flickr.com/photos/progressive_insurance/4838281534/ in/photostream Progressive Insurance (2007). Progressive Immediate Response Vehicle, Arriving in the Rain. Retrieved Nov 18, from http://www.flickr.com/photos/progressive_insurance/4834844557/ in/photostream.
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