Date of Submission
Progressive Corporation Case Study
The automobile industry has three segments, and they include the preferred segment, the standard segment, and the non-standard segment. Clients of the standard segment have the lowest accident risks. They are rarely given any tickets or charged for bad driving and speeding. They also have excellent driving records. The vehicles these clients use is normal- range and they are not expensive nor fast. On another hand, the standard segments involve individuals who have a medium accident risk. A study shows low risk clients with good driving records. At the time of estimation, the first two segments made up to 80% of the insured automobiles. The third segment, which is the non-standard, is made up of the people with high risk profiles. They had poor driving and drunk driving records, were young male and those drivers who were over 65. Also, those with high-performance cars and those with no prior insurance were classified into the third category. At the time of founding Progressive Corporation, only the standard and preferred categories were signed by the large players in the $165 billion US private passenger auto insurance industry. The non-standard, which was viewed as high-risk and likely to result in losses, was largely ignored. However, this situation presented an opportunity to grab a niche of the market. Peter Lewis, the Chairman of the Progressive Corporation is quoted having said that the company is not concerned mainly with auto insurance but the primary focus lies in the reduction of human trauma and economic impacts that accidents can have in the victims. Its proposition value was “Fast, Fair, Better,” and was regarded as being the most innovative company. Progressive found its niche by focusing on the neglected, and for this reason, the company became the third most significant company in the automobile industry.
Progressive’s value chain is based on “Fast, Fair, Better.” This value proposition puts the customer as a priority; the company strives to make its customers feel appreciated and valued. The value proposition became a philosophy of the company since its foundation, when it targeted those potential customers who were neglected for their perceived high-risk profiles. One of the biggest pillars of the company is the use of data mining to determine the market landscape. In order venture into the non-standard segment of automobile insurance, the company conducted a research and was able to further categorize the high risk drivers. Fathers with drunk driving records were unlikely to reoffend while for bikes, which were a no go zone for other insurers for their apparent susceptibility to accidents, the company recorded that brands like Harley-Davidson owners had unique characteristics. They were older than 40 years, meaning that they were family men with well-paying careers and barely used their bikes. Such information became crucial in enabling Progressive Corporation to take the bold step into the feared pool of non-standard automobiles. Despite their higher premiums, they were the best option and they got customers, hence profitability. In the late 1980s, this model came under attack after the ratification of Proposition 103. It proposed that insurance prices be cut by 20%. It was implemented, thus causing a drop in pricing to about 4.1% in 1993. This caused a leap onto the Immediate Response phase in the 1990s and the Concierge of the 2000s, in which the company sought to personalize its operations and respond to customer needs in a faster and better manner.
Progressive Corporation is a company that is unique in its perspective of how the industry landscape is shaped. It goes against the industry currents, taking risks that other companies avoid by conducting proper research. These calculated risks have given the company an edge over all other companies as its solutions fit the description of ‘disruptive.’ The services offered are largely ignored by every mainstream company until Progressive innovates and explores its profitability before other insurers flood in to enjoy the profits. This is seen in its focus on insuring the non-standard segment of customers, who were perceived as high risk until data-mining proved otherwise for some of the cases. It is true that they were high risk, and demanded for higher payments, which justified higher premiums, thus jolting Progressive to the position of third most-significant company in the market.
Disruptive innovations are always favored by the market because they present a much-needed solution that other companies or parties are afraid of offering for the risk of losing profits or no idea of turning them into profitability. Progressive’s strategy is one that ensures its survival through tough times in the market, ensuring that it emerges stronger and more innovative. I would, thus, continue with its strategy.
The company expands at a rate that correlates to the pace of market growth. It relies on the unexplored areas to boost its quest for rapid expansion. It provides a levelling ground for all categories of customers, thus ensuring profitability in this process.
The company is unique in its image as one that is non-discriminative and puts the customer first. Its value proposition is seen through the services it has offered throughout its existence.
The pricing is based on values obtained from data mining, which are fair market prices.
Insurance of all segments of customers
Integration of technology in service provision such as that in Immediate Response
The company’s crucial driver is its philosophy of thinking different. For this reason, joint ventures may not be favorable. Instead, internal human resource development to embrace the core company values is essential. Acquisitions are also another way to ensure expansion.
The economic logic in the operations of the company is to offer Premium costs due to unmatchable service.