Innovation at Progressive (A): Pay-As-You-Go Insurance Harvard Case Solution & Analysis

Q3.) Is Progressive’s model sustainable?

Progressive’s autograph insurance model is quite attractive and appealing to customers as it offers usage based insurance premium and risk is calculated based on the location, time, driver profile and so forth by giving weight to each factor. In this way the prices charged to each customer will differ, hence, it will make a more reasonable risk premium in accordance with the risk faced by the company. Consequently, customers with lower risk exposure will be interested to buy insurance from Progressive in search of lower interest premiums, which will increase the customer base and customers with more risk exposure will go to other competitors. Autograph model can be extended to urban areas of other states of US where readily available infrastructure can help Progressive in successfully launching the autograph model, moreover, the extension of autograph model to home insurance market may not be able to make difference from the traditional way of charging premium, however, renter insurance market can be approached with autograph model where the premiums are based on same factors except the driver profile. However, the extension of autograph into other states will require detailed analysis of state policies regarding the insurance regulations.

Pros and Cons

Since Progressive is the first insurer to offer insurance policy that charges insurance premium based on the concept of “Pay as You Drive” (PAYD), hence, it will enjoy the first mover advantage.

Moreover the entry of Allstate, who is a major competitor of Progressive, into non standard segment, destroyed its competitive position. Development of autograph will enable Progressive to regain its competitive position and launch of autograph will satisfy customers’ needs and will probably exceed their expectations as stated by one of the user of autograph pilot service. Thus, it will be in line with the company’s strategy of consumer satisfaction through innovation.

Additionally, autograph will appeal consumers with low risk exposures that will increase customer base of Progressive and it will be able to sell other related services to the users of autograph; hence, it will generate cross sales revenues as well.

However, the autograph is not tested before, therefore, the risk of failure still exist to some extent. In addition, the huge investment in research and development cost in developing autograph will be lost and heavy investment in equipments will sunk.

Meanwhile, if autograph fails then Progressive will incur huge losses in revenue from its existing profile.

Resources and Capabilities

Progressive employees are capable of operating information technology based system of measuring risk profile of different customers based on their profile and mileage used. Moreover, the company is equipped with Global Positioning System (GPS) and wireless technology in order to monitor and maintain the record of user and miles travelled by each customer. Further, data mining capabilities of Progressive enable it to gather customer data from different resource on readily available market of internet and it’s technicians are professionally trained to maintain equipments used in provision of autograph services.

However, the Peter Lewis is suggested to make better use of immediate response vehicle in order to provide quick services to its consumers. Furthermore, they should bring more innovations in the service in order to retain their differentiating position in the automobile industry. Progressive should invest in making the information transparent and accessible to its consumer regarding the premium charges based on their risk profile so that they are in a better position to make judgment of purchasing insurance policy.

Additionally, the profitability of autograph highly depends on the public awareness of methodology used in charging usage based premiums and in order to create public awareness Progressive needs to invest in marketing of autograph characteristics.


Progressive’s autograph model is already a win-win model for the company. But the company needs to decide where it should launch the model as states differ from each other in their level of risk tolerance and acceptance/rejection criteria. Progressive’s autograph model will prove successful in the United States due to familiarity of the tastes of consumers in this industry and the related factors. The model is based on giving weights to each of the factors, from driver to the road to the miles travelled and to the infrastructure on which the insured car will travel, which makes it possible for Progressive to discard the lemons in its target market and attract those with low risk profile...................................

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