Progressive Corp..Ashky
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Progressive Corp..Ashky Presentation Transcript

  • 1. Case Analysis MBAM619.11 Hongchul Jun, Yokesh Kumar, Samantha Tang, Kenny Toop, & Ali Yazdi
  • 2. 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
  • 3. PEST Analysis- Economic
    • Car insurance premiums based on age, gender, marital status, vehicle information
  • 4. PEST Analysis- Economic
    • Unleaded Gas Prices, (Cents per gallon, NSA)
    http://www.economy.com/freelunch/protected/cht/default.aspx?task=chart&s=XCPMGASUW%2EUS
  • 5. PEST Analysis- Economic
    • Total Auto Sales (Ths., NSA)‏
    http://www.economy.com/freelunch/protected/cht/default.aspx?task=chart&s=XRVEH%2EUS
  • 6. 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
  • 7. 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
  • 8. Industry Chain Insurance Companies Internal Agencies Independent Agencies Governments Regulations Remote Selling Drivers Non-standard Standard Standard
  • 9. 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
  • 10. 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
  • 11. 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
  • 12. Industry Analysis Source: http://www.naic.org/documents/research_premium_by_LOB.pdf
  • 13. 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
  • 14. 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:
  • 15. Data Gathering Inbound Logistics Operations Outbound Logistics Marketing & Sales After Sales Service Traditional Auto Insurance Industry Value Chain Underwriting margin : 2% Rating Underwriting
  • 16. 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
  • 17. Marketing & Sales
    • Express Quote Service-compare price with other insurers
    • AutoPro-Reduced underwriting costs through direct calling (15% to 5%)‏
    • Walk-in service center
  • 18. 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