Progressive Corporation (1984 93) Team Asian Invasion


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Progressive Corporation (1984 93) Team Asian Invasion

  1. 1. ENVISIONING STRATEGY MBAM 619 TEAM aSIAN iNVASION Hall Zhang Kaustubh Thakur Lance Kawamoto Pranajaya Soedradjat Raymond Zhang
  2. 2. TYPE STENGTH OF IMPACT MAIN IMPACT POINTS POLITICAL VERY HIGH State and Federal regulations control insurance and traffic laws that directly affect insurance companies and their consumers ECONOMIC LOW Recession in the early 1990’s had an impact on revenue and profit SOCIAL LOW Changes in demographics and locations impact number of drivers and classification of standard and non-standard (e.g. migration to Southern California increased number of drivers on the road)‏ TECHNOLOGY VERY HIGH Disruptive technology that affects both the company internally and external indirect impact on progressives business
  3. 3. 1980 1984 1982 1985 1990 1995 1988 1986 Government starts drunk driving campaign Introduction of MADD Seat belt law Minimum Drinking age Introduction of air bags Anti Lock Breaks Speed limit increased to 65 MPH on rural hwy’s California Prop 108 – reducing fees 55 MPH speed limit repealed Sobriety checkpoints legalized State Power <ul><li>Imposes insurance requirements (mandatory except. FL, NH, WI)‏ </li></ul><ul><li>Imposes general traffic rules </li></ul><ul><li>Controls vehicle registration </li></ul><ul><li>Controls who gets drivers license (e.g. Age)‏ </li></ul><ul><li>Regulates Insurance companies, including product, </li></ul><ul><li>distribution and pricing </li></ul>Federal Power <ul><li>Controls # of Highway Patrol and Policemen </li></ul><ul><li>Controls funds for interstate highways </li></ul><ul><li>Controls interstate commerce </li></ul><ul><li>and transportation laws </li></ul><ul><li>Imposes transportation safety requirements </li></ul><ul><li>Impose laws on insurance, auto, </li></ul><ul><li>and construction companies </li></ul>
  4. 4. Internal Changes External Changes Centralized data base And computer system Law enforcement technology increased the frequency of traffic violations New security and safety devices reduce risks of theft and accidents. Insurers could decrease premiums or reap additional profits from reduction in Loss Ratio ABS Brakes New computer and communication systems increase operation efficiency by decreasing reducing the number of incorrect quotes and speeding up application process by 30%
  5. 5. Industry sector and the NAICS two digit code: 52-Finance and Insurance Industry sub-sector and the NAICS code: 524126-Automobile insurance carriers
  6. 6. HHI
  7. 7. <ul><li>Growth rate </li></ul><ul><ul><li>1974-1983: 9.8% </li></ul></ul><ul><ul><li>1984-1993: 11.2% </li></ul></ul><ul><li>Industry profitability: </li></ul><ul><ul><li>Underwriting profit: -4.1%, -7.2% </li></ul></ul><ul><ul><li>ROE: 9.04% </li></ul></ul>
  8. 9. Life cycle: growth. The cycle of industry creative destruction: recombinant market leaders.
  9. 10. Customer Insurance Company 3 Insurance Company 4 Insurance Company 2 Insurance Company 1 Insurance Company (Picked)‏ Price Comparison
  10. 11. Customer Insurance Company 3 Insurance Company 4 Insurance Company 2 Insurance Company 1 Insurance Company (Picked)‏
  11. 12. Customer Representative Insurance Corporation The Agent Customer Hotline Vendors Customer Customer
  12. 13. Inbound Logistics and Operations <ul><li>Collecting and analyzing accident data to separate drives in to more risk categories and price policies to match the underwriting risk </li></ul><ul><li>Seeking to offer a wider array of payment plans, limits of liabilities, and deductibles than its competitors </li></ul><ul><li>Pursuing a very conservative investment strategy </li></ul>
  13. 14. Information and Communication Technology <ul><li>Installing computers system and nation voice/data system </li></ul><ul><li>In 1998, Progressive installed $28 million computer system and national voice/data system which allowed faster communication between agents and headquarters and shorter processing times for both applications and claims. The system also speeded up the claims processing and decreased operating expenses. </li></ul>
  14. 15. Marketing and Sales <ul><li>Using own sales force to call on agents </li></ul><ul><li>Introducing the express quote service </li></ul><ul><li>Toll-free number (1800-auto-pro)‏ </li></ul><ul><li>Building “walk-in” customer service centers and “drive-in” consumer auto insurance service center </li></ul>
  15. 16. After-sales service <ul><li>Installing the “immediate response” system </li></ul><ul><li>Set a toll-free number that the claimant could call 24 hours, seven days a week </li></ul><ul><li>Authorizing claims adjusters to write a check at the scene of the accident </li></ul><ul><li>Investing a measurement system which enabled to record the time elapsed every step from accident to claim settlement </li></ul><ul><li>Introducing cost containment programs </li></ul><ul><ul><li>Progressive offered a set of options that could roll back premiums by 12 to 20 percent. </li></ul></ul>
  16. 17. Human Resource Management <ul><li>Hiring young employees and trained them heavily and avoiding hiring employees from standard insurers </li></ul><ul><ul><li>Progressive avoiding the employees from standard insurers because they were imbued with the wrong, combative mind-set. Meanwhile, progressive not only trained the new employee insurance regulation but also the art of negotiation and grief counseling. </li></ul></ul><ul><li>Demanding an extended-workday schedule for adjusters </li></ul><ul><li>Constructing a new headquarter which would aid employee recruitment and retention </li></ul>