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Progressive Corp..Ashky

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Information about Progressive Corp..Ashky
Business & Mgmt

Published on February 16, 2009

Author: smehro

Source: slideshare.net

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Case Analysis MBAM619.11 Hongchul Jun, Yokesh Kumar, Samantha Tang, Kenny Toop, & Ali Yazdi

PEST Analysis- Political Proposition 103 (California)‏ Prior to the passage of Proposition 103 on November 8, 1988, the California Department of Insurance operated under the McBride-Grunsky Insurance Regulatory Act. Under this Act, insurance companies were not required to file rates for approval except for health and life. California was considered an "open competition" state in which competition regulated the marketplace. Prop 103 changed landscape of how insurance companies compete and brought clarity to consumers State laws required most drivers of motor-vehicles to have auto insurance Each state issues regulations specifying minimum liability coverages and other mandatory coverages State governments required standard carriers to underwrite non-standard risks under the Assigned Risk Plans (later called Automonile Insurance Plans)‏ State regulators set premiums for non-standard risk applicatns

Proposition 103 (California)‏

Prior to the passage of Proposition 103 on November 8, 1988, the California Department of Insurance operated under the McBride-Grunsky Insurance Regulatory Act. Under this Act, insurance companies were not required to file rates for approval except for health and life. California was considered an "open competition" state in which competition regulated the marketplace.

Prop 103 changed landscape of how insurance companies compete and brought clarity to consumers

State laws required most drivers of motor-vehicles to have auto insurance

Each state issues regulations specifying minimum liability coverages and other mandatory coverages

State governments required standard carriers to underwrite non-standard risks under the Assigned Risk Plans (later called Automonile Insurance Plans)‏

State regulators set premiums for non-standard risk applicatns

PEST Analysis- Economic Car insurance premiums based on age, gender, marital status, vehicle information

Car insurance premiums based on age, gender, marital status, vehicle information

PEST Analysis- Economic Unleaded Gas Prices, (Cents per gallon, NSA) http://www.economy.com/freelunch/protected/cht/default.aspx?task=chart&s=XCPMGASUW%2EUS

Unleaded Gas Prices, (Cents per gallon, NSA)

PEST Analysis- Economic Total Auto Sales (Ths., NSA)‏ http://www.economy.com/freelunch/protected/cht/default.aspx?task=chart&s=XRVEH%2EUS

Total Auto Sales (Ths., NSA)‏

PEST Analysis- Social Progressive strived to reverse reputation of the car insurance industry Transform the human experience of dealing with customers providing low cost and high service

Progressive strived to reverse reputation of the car insurance industry

Transform the human experience of dealing with customers providing low cost and high service

PEST Analysis- Technology “ Prince of Smart Pricing”- using data to analyze risk more efficiently resulting in better pricing Express Quote Service- provided pricing clarity to customers in California Track metrics such as “loss report lag time” to track how efficient Progressive was in their policies

“ Prince of Smart Pricing”- using data to analyze risk more efficiently resulting in better pricing

Express Quote Service- provided pricing clarity to customers in California

Track metrics such as “loss report lag time” to track how efficient Progressive was in their policies

Industry Chain Insurance Companies Internal Agencies Independent Agencies Governments Regulations Remote Selling Drivers Non-standard Standard Standard

Value Chain Where can an insurer gain an edge? M A R G I N Financial Policy - Legal - Organizational Form Regulatory Compliance - Accounting - Incentive Systems Actual Training Actual Methods Investment Practices Information Technology Actual Training New Product Development Market Research Communication Technology Adjuster Training Settlement Procedures Data Gathering Rating Underwriting Investment Policy Issuing Billing and Collections Claims Response Loss Settlement Loss Control New Policy Sales Policy Renewal Policy Re-pricing Create Network of Independent Agents/Build up Internal sales force Agent MGMT. Advertising FIRM INFRASTRUCTURE HUMAN RESOURCE MGMT. TECHNOLOGY DEVELOPMENT PROCUREMENT INBOUND LOGISTICS OPERATIONS OUTBOUND LOGISTICS AFTER-SALE SERVICE MARKETING AND SALES

Where can an insurer gain an edge?

Financial Policy - Legal - Organizational Form

Regulatory Compliance - Accounting - Incentive Systems

Actual Training

Actual Methods

Investment Practices

Information Technology

Actual Training

New Product Development

Market Research

Communication Technology

Adjuster Training

Settlement Procedures

Data Gathering

Rating

Underwriting

Investment

Policy Issuing

Billing and Collections

Claims Response

Loss Settlement

Loss Control

New Policy Sales

Policy Renewal

Policy Re-pricing

Create Network of Independent Agents/Build up Internal sales force

Agent MGMT.

Advertising

Industry Analysis Source: http://www.census.gov/econ/census02/data/industry/E524126.HTM This industry comprises establishments primarily engaged in initially underwriting insurance policies that protect policyholders against losses that may occur as a result of property damage or liability. SIC Code - 6331 Establishments primarily engaged in underwriting fire, marine, and casualty insurance. Source: http://www.osha.gov/pls/imis/sic_manual.display?id=260&tab=description

Industry Analysis Year $ billion Market size grew from $21 billion in 1975 to $109 billion in 1993 The top 10 underwriters accounted for approximately 51% of the total market

Industry Analysis Source: http://www.naic.org/documents/research_premium_by_LOB.pdf

Industry Analysis Source: http://finance.yahoo.com/q/ae?s=PGR Over the next 5 years (from current) the industry and sector growths are forecasted to be 10.8% and 9.1%, respectively

Industry Analysis Standard Segment Nonstandard Segment Lower risk Excellent driving record Typically between the age of 20 and 70 Higher risk Previous accidents and/or violations First time drivers Elderly License previously suspended The auto insurance industry generally breaks down their customers into two segments:

Lower risk

Excellent driving record

Typically between the age of 20 and 70

Higher risk

Previous accidents and/or violations

First time drivers

Elderly

License previously suspended

Data Gathering Inbound Logistics Operations Outbound Logistics Marketing & Sales After Sales Service Traditional Auto Insurance Industry Value Chain Underwriting margin : 2% Rating Underwriting

Immediate Response System Quick settlement of claims (56% settled within 7 days)‏ Attorney involvement reduced by 20% Reduced costs (e.g rental car,storage of damaged car etc.,)‏ Satisfied customer promotes the company

Quick settlement of claims (56% settled within 7 days)‏

Attorney involvement reduced by 20%

Reduced costs (e.g rental car,storage of damaged car etc.,)‏

Satisfied customer promotes the company

Marketing & Sales Express Quote Service-compare price with other insurers AutoPro-Reduced underwriting costs through direct calling (15% to 5%)‏ Walk-in service center

Express Quote Service-compare price with other insurers

AutoPro-Reduced underwriting costs through direct calling (15% to 5%)‏

Walk-in service center

Data Gathering Inbound Logistics Operations Outbound Logistics Marketing & Sales After Sales Service Progressive Auto Insurance Value Chain Immediate response System Process 30% more claims Underwriting Margin : 7.4% * *as of 2007 - Progressive annual report Rating Underwriting

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