INFORMATION TECHNOLOGY IN LOGISTICS
SUPPLY CHAIN MANAGEMENT
e-BUISNESS STRATEGY IN PROGRESSIVE INSURANCE:
Creating Value via Mobile Field Service
Faculty : Prof. Ashis K. Pani
Name : Gurjit Bhatia
SMS ID : 101903
Batch : PGCLSCM-3
Centre : Indore (M.P.)
e-Business Strategy in ProgressiveInsurance
Creating Value via Mobile Field Service
It is no secret that in every industry, consumer expectations are climbing. To meet these
increased demands, companies need to run their business operations more efficiently. The
current field service processes are loosing their ability to deliver first-rate customer
service. To solve this problem, companies are beginning to invest in mobile field service
processes that can serve customers faster and make it easier for customers to do business
Progressive Insurance is widely considered a best-practice company in customer
Service. For some time, the company has been relentlessly executing against the focal
Point of being “Easy To Do Business With.” In order to live up to this reputation,
Progressive is an early adopter of and heavy investor in technology.
Mobile Technology, Claims, Insurance, Customer satisfaction, Customer service
Founded in 1937, The Progressive Corporation is the fourth-largest auto insurance
company in the United States, with more than 8 million customers. The Progressive
Corporation acts as an insurance holding company for 69 subsidiaries, one mutual
insurance company affiliate, and one reciprocal insurance company affiliate. The
company's subsidiaries and affiliates sell personal automobile insurance and other
specialty property-casualty insurance and related services. (Property-casualty insurance
protects customers from costs incurred from collisions and physical damage to their
motor vehicles and from liability to others for personal injury or property damages from
using other’s vehicles.)
DESCRIPTION OF BUISNESS
Personal Lines This segment writes insurance for private passenger automobiles, as well
as recreational and other vehicles. Private passenger automobile insurance comprises
preferred, standard, and nonstandard automobile risks. The first two account for about
80% of the U.S. personal automobile insurance market, while the third accounts for the
remaining 20%. Progressive actively participates in the market for each of these risks,
with the objective of offering a competitive rate for all risks. In addition to automobiles,
Progressive also offers specialized personal line products for motorcycles, recreational
vehicles, mobile homes, watercraft, snowmobiles, and similar items.
Other Businesses The company's other lines of business include the commercial vehicle
business unit, lenders' collateral protection group (LCPG), professional liability group
(PLG), and motor carrier business unit. These businesses collectively contributed
approximately 12% of 2002 revenues.
Distribution Channels Progressive either directly writes the personal lines insurance
itself or indirectly sells policies by an agent or broker. The company’s agent channel
spans a network of more than 30,000 independent U.S. insurance agencies, as well as
insurance brokers in several states and other strategic alliances. Progressive also uses its
agent channel to form alliances with other insurance companies, financial institutions,
employers and national brokerage agencies.
Direct business includes business written through 1-800-PROGRESSIVE, the company
Web site, and on behalf of affinity groups. Progressive’s strategy is to become the low-
cost provider of a full line of auto insurance products and related services, distributed
through whichever channel the customer prefers.
Progressive’s Focal Point — Becoming “Easy To Do Business With”
Always an innovative insurer, Progressive wanted to make it easy for average people to
protect one of their most important investments — their vehicles. Progressive was the
first to allow customers to pay their premiums in installments an option that appealed to
workers who could not afford annual premiums.
ADVANCEMENTS OF COMPUTING ENVIRONMENT (ICT use)
The company set a new standard for customer service in 1990 when it introduced, in
combination with a full range of personal auto insurance products, the Immediate
Response claims service, which is available 24 hours a day, 7 days a week. Help was just
a phone call away, any time of the day or night. Progressive’s claims representatives,
traveling in Immediate Response Vehicles (introduced in 1994), could even come right to
the scene of an accident.
The year 1992 brought 1-800-AUTOPRO, a cutting-edge auto insurance rate comparison
shopping service. No longer would customers have to spend endless amounts of time
Calling around to compare auto insurance rates. One phone call to AUTO PRO would
give customers a Progressive quote and comparison rates for up to three competitors. If
the customer was satisfied with the Progressive quote; he could buy the policy directly on
the phone or locally through an independent agent.
In 1995, the company stepped into the future with the launch of its Web site and became
one of the first major auto insurance companies to establish a presence on the Web. By
1997, Progressive was offering real-time online sales of auto insurance to its customers.
Taking this one step further, Progressive made it possible for customers to manage their
policies online by making payments and changing coverage.
In 2000, the company introduced its customers to an easier way to get their cars fixed
after an accident. The aim of this new service is to lower the customer’s anxiety level,
which is invariably at its highest after the person’s car is damaged.
Customers can now bring their vehicles to Progressive’s new claims centers directly
following an accident and pick up a rental vehicle. Progressive will prepare the estimate,
choose a qualified repair shop, and inspect the vehicle after the repairs are done. This
service has reformed the vehicle repair process, raised consumer satisfaction, increased
company productivity, and improved the cycle time and the quality of repairs.
Initially slow to change, the decades-old auto insurance industry is finally beginning to
adopt new technologies, namely wireless applications. Onboard and mobile technologies
create a tremendous amount of possibilities that can benefit insurers and customers alike.
In addition, the relative cost of this technology is becoming more affordable and, as a
result, more companies are able to effectively utilize it. Claims processing, field force
automation and policy pricing are just a few of the areas that can directly and quickly
benefit from the integration and use of wireless applications.
According to the Insurance Information Institute, insurers spend approximately $180
billion in claims payments each year. For every dollar spent on auto insurance, roughly
34% goes to claims processing and other claims-related costs (see Figure ). While many
Auto insurers have focused on reducing payments for injuries, damage, and operational
expenses, very few have found successful solutions for driving down the costs of claims
and claims processing.
$.34 Claims &
$.50 Payments for operational
Injuries and Expenses
Total = $1.08*
*Includes interest, dividends,
and realized capital gains.
Figure: Dollar Cost Breakdown in the Insurance Industry
A claim is generated every time an unforeseen accident occurs. Whether drivers are rear-
ended in stop-and-go traffic, caught in an unexpected hailstorm, or sideswiped in a
parking lot, all the incidents result in a new claim being filed. While the damage may
only take a fraction of a second to occur, the chain of events that subsequently unfolds in
processing the claim could take months or even years to settle. Lengthy settlements
rarely pay off for the consumer and usually result in increased frustrations and bitter
feelings toward the insurer. By shrinking the claims processing time frame from months
to hours, the company can boost customer satisfaction and long-term loyalty. Companies
can take a traditionally burdensome and exasperating process and turn it into a helpful
and satisfying customer experience.
Additionally, lowering the high cost of claims processing can immediately affect an
insurer’s bottom line and allow the company to sustain a competitive advantage. Yet,
because of antiquated mainframe systems, slow-to-change work processes, and the
perceived high cost of alternatives, many insurers have been slow to take advantage of
technologies that could improve the claims process.
Claims have traditionally been a bumpy and difficult process for both customers and
insurers. Documentation requirements, company policies, and unexpected circumstances
often combine to complicate and delay claims fulfillment (see Figure). Other factors
such as lawyers and appraisers only add more obstructions. Claims agents find
themselves overloaded with work and sometimes inconsistently addressing similar
Figure: Insurance Claims Processes
Even the process itself can create problems of its own. Once a claim is made by a
policyholder, the claim is assigned to an adjuster, who alone is responsible for
interviewing the parties involved, inspecting the vehicles, and settling the dispute.
Because adjusters handle so many claims at once, and because they work a conventional
nine-to-five day, claims can languish for days in an in-basket before they are addressed.
Rather than provide great customer service, overwhelmed insurance adjusters Shuffle
Mountains of paper and make their customers wait on the phone for the “next available
adjustor”. Tenuously connecting this lengthy and cumbersome process is tons of
bureaucratic red tape. Forward steps cannot be taken until all previous steps are
accurately satisfied. Claims adjusters are rarely given the autonomy to solve problems or
develop innovative ideas to get around potential obstacles to save time and money.
Meanwhile, customer service is nonexistent.
Policy Pricing and Segmentation
The auto insurance industry has been debating the use of variable-based pricing criteria
for decades. Until now, no cost-effective, accurate, and sophisticated tools were
available to allow any insurer to test and validate its worth. Most models for
underwriting and rate pricing are weak or inflexible.
Some insurance companies rely on actuarial analysis of their customers to enable them to
Assess risk. They are able to further divide their various segment populations, for
instance, safe groups within the 18-25-year-old drivers who are lower risks, such as those
who have Ph.D.s. Other insurers have already decided what rules they will use to
determine if an applicant is eligible for insurance. Either a risk fits the company's criteria
Or it does not. If a particular risk does not qualify, the customer will have to change to
meet the insurer's standards, or shop elsewhere for coverage.
Consumers expect insurance rates to vary widely — even by hundreds of dollars — from
company to company. Prices for the same coverage differ primarily because insurers
Have varying claims experience and different costs of doing business. Auto insurance is
priced to cover the costs of accidents that may happen in the future. Companies cannot
predict the future, so they use information based on their past claims experience. Since
each company has different claims experiences, their rates will vary widely. Likewise,
each company's financial goals and costs of doing business (how much they pay to sell
and service policies) are different, resulting in the price discrepancies. In simple terms,
auto insurance companies price policies to cover accidents, claims, building leases, and
other claims-related costs, as well as non-claims expenses such as customer service
salaries, advertising, and the price of selling policies.
The consumer is at the losing end of this pricing structure, which traditionally leaves very
little room for flexibility and places drivers in few categories and rate scales. Desirable
drivers are rewarded for a clean driving record, while risky drivers are punished with
high premiums. As a result, insurers themselves have segmented into carriers that cover
different types of drivers. Many auto insurers refuse to cover drivers considered to be
“High-risk,” while other companies specialize in insuring those drivers.
Clearly, there is a strong business case to be made for improving the claims process
using cutting-edge technology to control decreasing margins, rising costs, and increasing
While insurers have implemented technology in various degrees, few have turned to
mobile technology tools for their claims adjusters. Mobile will help in the following
• Improving Adjuster Utilization Efficiencies gained through adjuster initiatives can be
Easily measured and provide a high ROI. If adjusters can be reached throughout the day
(anywhere and anytime), additional appointments can be made on the fly, resulting in an
increased caseload. The customer’s information and location can be transmitted to an
adjuster's mobile device that directly links the adjuster to the policyholder. In addition,
if online access is granted through a wireless component, directions to the site can be
gained through a resource such as Map Quest. Such connectivity not only affects the
ease with which an adjuster handles daily workloads, it starts a domino effect of
efficiency throughout the organization.
• Reducing Call Volume Expediting the claims process translates into a direct decrease
to the large volume of calls that customer service representatives receive. If claims are
handled more quickly, customers will call less frequently with inquiries about their
status. In addition, with tools such as e-mail and instant messaging services
communications, a customer can be updated on her claim’s status instantly.
• Enhancing Accuracy of Data Another benefit of enabling claims adjusters to enter
information in real time is that, not only is the arduous task of data entry from paper
(and the mistakes that occur when it is entered) eliminated, but carriers become equipped
with a very robust database of information that is updated in real time.
DESCRIPTION OF STUDY SOLUTION
True to its reputation as an innovator, Progressive has been an early adopter of and heavy
investor in information technology. When the wireless wave came along, the company
was predisposed to think about how it could use wireless technology to its advantage.
Progressive decided to use mobile technology to tackle four major problems in the auto
Claims Processing, Field Force Automation, Variable Pricing and Customer Satisfaction.
Mobile Claims Processing and Field Force Automation
At the heart of Progressive’s innovative business performance is Immediate Response, its
Speedy claims service. Before implementing Immediate Response, Progressive’s claims
Process was inefficiently and lengthy. Today, its representatives are available 24x7.
When an accident is called into Progressive by one of its policyholders, an adjuster is
Dispatched to the accident scene with a laptop, intelligent software, and the power to
Make on-the-spot decisions. The result is faster, less expensive and more profitable
Service. In fact, Progressive can perform several tasks at the scene of the accident that
Would normally take other insurers weeks, or even months, to complete (see Figure).
Figure: Transactions in the field
The Mobile Claims Process. The first step of Progressive’s Immediate Response claims
Process is designed to be quick and flawless, with a continuous flow of information
between the customer, Progressive's central database, and the local claims operation.
When a claims representative is dispatched to an accident site, the corresponding claim
number is radioed to the rep, so the customer’s policy and information can be
downloaded onto the rep’s laptop. However, this smooth hand-off did not become
possible until Progressive's Information Systems department developed Claims
Workbench, the software behind the hand-off. Initially, reps relied on cell phones to
execute Immediate Response. They had to call dispatchers repeatedly to relay data or to
retrieve coverage information from the mainframe. If reps did not return to the office
right away to update a file with their estimate, the job would not get done until the end of
the day or the following morning.
With more than 2,000 Immediate Response Vehicles (IRVs) on the road nationwide
(Progressive’s now famous white vans with the company logo painted on the side) being
dispatched to accidents, repair shops, and salvage yards, Progressive had to reinvent the
claims dispatching process. Its solution was to enable each vehicle with a wireless laptop
and digital camera. Now, the IRVs can respond to any accident within moments of a
Customer’s first call to report an accident (see Figure).
Figure: Progressive's Mobile Claims Architecture
In fact, the IRVs are constantly on the road looking for accidents. Progressive has shown
Up at the accident scene, processed the claim form, and handed the insured a check all
right at the crash site.
Mobile Pricing and Customer Satisfaction
To maintain its competitive edge, Progressive is adopting innovative pricing models.
One approach is to capture real-time customer driving behavior data. In August 1998,
Progressive began testing a new product that bases auto insurance premiums partly on
when, where, and how much a vehicle is driven.
The product, Autograph, requires the installation of a GPS device, a cellular phone, and a
crash data recorder in the user's car. A recorder in the Autograph equipment tracks the
car's movements every six minutes. Once a month, the company's computer calls the car
to find out where it has been. This information is then used to set the premium for the
month. At the month's end, customers receive a bill that charges them for their actual
driving histories (see Figure).
Figure: The Autograph GPS Tracking System
The Autograph program sprang from Progressive’s reasoning that its customers were less
likely to get into an accident driving in rural, remote areas than heavily trafficked
Interstate metropolitan areas; accordingly, it developed a better database of risk using
mobile feedback and location sensitivity. At the same time, Progressive saw its
customer Relationships improve — its personalized portal let customers go in and see
their records, their driving history, and their relationship with Progressive.
With the Autograph system, some of the traditionally fixed consumer costs now become
Variable costs. Rather than use broad categories for its policyholders, Progressive can
take into account the average monthly distance customers drive, how safely they operate
their vehicle and where they commute. This shift can save the customer money; less
driving overall and less risky driving in particular can both directly reduce costs.
This type of pricing saves low-risk drivers from subsidizing high-risk drivers, allows
high-risk drivers the opportunity to improve their status through safer driving, and gives
customers more control over the type of policy pricing they select. Customers who used
Autograph in the test pilot program conducted in Houston, Texas, paid up to 25% less in
automobile insurance each month Additional Autograph features, such as tracking stolen
vehicles, gives customers a sense of personal security and were an added benefit of the
For Autograph to be successful, Progressive must effectively utilize the information
collected from customer tracking. Preferably, the company will use this information to
set its customers’ insurance premiums to match their risk and driving habits and placate
the fears some have about what the company could do with such private information .
Autograph technology gives Progressive a competitive advantage over the insurers not
using similar technology and underwriting techniques. Progressive could more
accurately identify and attract low-risk, low-mileage drivers, leaving higher-risk drivers
to the other insurers. Deploying this sophisticated technology to get a better
understanding of its customers and the insurance market is consistent with Progressive's
strategy of staying ahead through a first-mover advantage.
Progressive has also put the power of mobile technology into the palms of its customers.
Recently, the company announced its latest online development: making auto insurance
services and information from progressive.com available on Web-enabled cellular phones
and hand-held devices from anywhere in the world, at any time. This technology gives
consumers even more control of their auto insurance policies and information .Once
again, Progressive is the first to adopt and deploy technology that helps simplify the auto
Insurance industry from the customer’s perspective.
To help make this project work, Progressive is using Wireless Application Protocol
(WAP) technology to allow Web-enabled phone and hand-held device users to log on to
progressive.com. early wireless functionality from progressive.com includes the ability
to locate a nearby independent agent by entering a zip code, to contact the company to
report a claim, to receive an insurance quote, and to service an existing account.
Future developments may include enabling customers to view information about
accounts, coverage, and vehicles and even be reminded when repairs are complete at an
auto body shop. The company has made significant investments and must carefully
examine the cost/value of being first.
Strategic initiatives cannot be realistically pursued-or even funded-without steadfast
support from the executive suite. The degree to which a strategic mobile data initiative is
successful, or fully implemented, can be traced to the level of commitment that exists
with VP and C-level executives.
With the help of the wireless modem and laptop, the program allows reps to perform up
to 20 separate transactions in the field — everything from entering police-report
information to downloading specific car part costs and repair estimates. The ability to
instantly move information back and forth between a laptop and a mainframe and keep
claims moving toward resolution gives Progressive a major marketplace advantage.
Furthermore, the company’s Immediate Response service has boosted profits through the
elimination of inspection and repair delays, improved customer morale, decreased risk of
Fraud, and lowered monthly premiums.
Wireless technologies also afford Progressive several intangible benefits:
• Extending the reach of the company, allowing it to mobilize more workers and
move service delivery closer to the customer,
• Permitting the company to provide more personal, face-to-face service to
customers through location services,
• Giving mobile workers more account-specific information to enrich
• Fostering greater and quicker communications between company personnel
• Allowing mobile workers to offer more services and conclude more transactions
in Real time,
• Expediting the dispatch and provisioning of service from field workers, and,
• Providing more accurate, convenient, and streamlined service by collecting data
at the Source and eliminating rekeying steps.
Progressive's vision was to collapse the cycle time for claims processing by going right
to the vehicle to process the claim. Ultimately, this will reduce exposure to litigation,
the company’s loss adjustment expense, and the length of time its clients are forced to
rent a car.
Some customers and consumer groups have raised concerns over Progressive’s use of
Autograph. While the company maintains that the information gathered is used strictly
for deciding insurance rates, some fear what could happen if the information got into the
wrong hands. Could the information be sold to third party groups who are interested in
your shopping habits? Does Progressive have a moral or legal responsibility to divulge
information if one of their customers is accused of committing a crime while driving?
And consumers need to consider the trade-off: are potentially lower rates worth more
than compromising personal privacy?
SPECIFICS TO COMPANY
In the extremely competitive insurance industry, constant improvements in customer
service are critical to value capture. In addition to significant initial and ongoing cost
savings and the increased productivity by reducing drive time and eliminating steps in the
communication and documentation processes, Progressive has derived many other
benefits from its mobile solutions.
• Increased efficiency — Representatives have time to call on additional customers and
Provide timely follow–up due to self-service.
• Improved customer response — Dispatchers communicate in real time with adjusters
in the field and have access to up-to-date and historical customer, vehicle, and fleet
information — all at the touch of a button.
• More calls completed on the first visit —Adjusters have on-site access to technical
Data and inventory information, such as diagnostics, schematics, and diagrams. The
Need to carry manuals and customer lists was eliminated.
• Improved payment cycle — Checks are automatically initiated as soon as jobs are
• Up-selling and cross-selling insurance policies — Progressive proactively notifies
Customers of quick quotes or rate changes and helps them calculate how much
coverage they need.
The Progressive Corporation is taking a long-term strategic (rather than tactical)
approach to improving customer service. Progressive is investing in mobile
technology to acquire, serve, and retain customers. The investments are wringing out
inefficiencies from its customer-facing and back-office processes and directly
affecting the company’s bottom line.
Progressive Insurance is deploying mobile field service to streamline its claims
processes and boost customer satisfaction. Progressive’s claims representatives can
perform up to 20 different transactions in the field on a single site visit. In addition,
it highlights a potentially profitable application of mobile in one-to-one pricing of
The return on investment (ROI) from technology investments is quite positive.
Progressive is growing much faster than the rest of the auto insurance industry, and
enjoys profit margins of 8%. This is in stark contrast to its peers, which have been
losing money due to underwriting losses over the past few years.
TRANSFERABLE TO OTHER COMPANIES/MANAGERS
The Progressive case study is a testament to the competitive advantage that companies
derive from taking an unconventional approach. The end result is impressive:
Progressive is growing much faster than the rest of the auto insurance industry — its
market share has grown 4.5% over the past 10 years while many other insurers are
struggling to maintain their customer base. Its net income in 2002 rose 62%, to $667
million, on revenues of $9.5 billion, up 30% from the previous year.
The Progressive Corporation has streamlined the claims process within the automotive
industry so much that it may be unrecognizable to longtime drivers who are used to
waiting months to be reimbursed for a claim. Other insurance companies can also follow
progressive insurance “brick-and-click” model i.e. Progressive equips its agents with
wireless laptops and a complete claims workbench; the agents are dispatched to accident
sites by the call center; the agents coordinate the required services (tow truck, car rental,
body shop); and the agents conduct a damage assessment and cut a reimbursement check
on the spot — all of which can be coordinated in minutes.
Customer service is vital to value creation in the insurance industry, particularly in auto
insurance, which is highly competitive. Despite the focus on customer service, customer
satisfaction levels are at all-time lows, with claims and other critical customer-facing
processes bogged down by paper trails, missed phone calls, erroneous data, and other
Mobile field force automation is a “must have” for insurance companies streamlining
their claims processes.
By adopting and deploying mobile technology, insurance companies can gain
lower claims costs, less litigation, greater efficiencies, and increased customer
satisfaction. Increased customer satisfaction results in improved customer
retention. In an industry where customer churn is costing insurance companies a
lot of money, this is a significant development.
E-Mobile technology is becoming a significant part of the insurance industry’s
landscape. Traditionally, insurance companies are used to dispatching adjusters
into the field to conduct inspections and start the claims process; thus, it is not
surprising that insurance field service claims adjusters have been early adopters of
Companies like progressive insurance that follows “brick-and-click” model are
far more successful than “click-and-click” model following companies and
definitely gets a competitive advantage in business.
Mobile field service applications have moved from the “nice to have” category to
the “need to have” category.
Mobile communications are on the cusp of the next big step, promising new
applications and services that will change the way people live and work. The
integration of the Internet, mobility and communications at the device, service
and transport level creates a new set of business opportunities. The business
challenge is bring together the three worlds with services that customers will pay
The longstanding insurance industry can effectively reinventing itself through the
use of mobile technology.
Mobile technology can unlock value and deliver ROI through improved customer
service and reduced costs.
The intelligent use of mobile can potentially change insurance pricing strategies
THANK YOU FOR YOUR ATTENTION