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

Innovation at Progressive (A): Pay-As-You-Go Insurance

Q1.) Describe the elements of Progressive’s strategy. Compare the elements of its strategy with that of the traditional competitors in the insurance industry (discuss the strategy of these firms together.

Key Elements of Progressive’s Strategy

Progressive’s strategy is to provide such services to customers that are most appealing to them and indulge them to use their differentiating service meanwhile, the strategy is aimed at achieving competitive advantage through provision of exceptional services to its customers. Moreover, the key elements of Progressive’s strategy include: satisfying customers through innovative products, exceeding customer expectations and competitive advantage through differentiating services. Progressive has been offering its customer with innovative products in order to satisfy consumers’ needs such as installment based insurance premiums and immediate response (IR); these innovative services of Progressive has been able to secure a competitive position.

Resources, Capabilities and Use of IT

Progressive is equipped with sophisticated software for calculating reasonable premiums, which helps it to provide exceptional premium to its clients based on their different variables. Moreover, the staff is specialized in their domain and is well-trained in order to provide quick service. Further, the staff is encouraged to take risk in order to bring innovation and new ideas of providing improved service. Meanwhile, Progressive is equipped with latest wireless technology in order to quickly respond to customer queries and the staff is also capable of using these technologies. With the help of the information technology, Progressive is able to deliver differentiating services in order to exceed customers’ expectations as per their strategy. Moreover, Progressive uses its sophisticated underwriting software to provide more innovative services.

Comparison with Traditional Competitors

Traditional competitors of Progressive are following state of the art, proven and experimented strategy, which includes provision of competitive services and pricing is based on risk measured through historical data, however, this strategy is not going to help companies for taking competitive advantage over its competitors.

Competitors are following strategy of charging premiums based on the traditional measures of risks, which is measured using the past record of similar vehicles, driving habits, age, violation records, etc. On the other hand, Progressive uses segmental pricing which are based on the nature and magnitude of harm that can occur from violation.

Moreover, the competitors are weighting one aspect of risk measurement to offer insurance services and to decide the level of risk premium; while Progressive is using sophisticated underwriting software to weight all the aspect of customer records in order to arrive at sensible premium levels, which gives it a competitive advantage over competitors.

Q2.) Discuss the characteristics of the industry and the environment in which Progressive competes.

Automobile Insurance Industry

The automobile insurance industry of US is lacking the information technology in insurance industry, which has created a lot of space for Progressive to capture a bigger part of the insurance market. Moreover, the proposition 103 was passed in order to protect consumers’ interest while making insurance claims and Progressive has taken the first mover advantage by adopting information technology in order to provide insurance claims within a reasonable time. Moreover, the industry is full of competition that enables Progressive to use its differentiating services to compete with the industry players. Additionally, the property-casualty consumers want transparency and access to information of insurers so as to make direct interaction with insurers. However, the existence of many suppliers in the market reduces the power of supplying insurance policy by insurers and increases the bargaining power of consumers because the switching cost of consumer is negligible, hence, the market is facing huge competition and the only competitive edge available to all competitors is lower price and development of differentiating service.


Moreover, the environment within which Progressive operates is price oriented where customers have numbers of choices to choose an insurance provider. In addition, the cost of entry into automobile insurance is not significantly high but insurance agents and customers may not be willing to rely on an unfamiliar insurer. The non-standard insurance policy market is not much developed and Progressive has the first mover advantage through moving into non standard policy offerings. Meanwhile in order to reduce the cost of commission, insurance companies are developing stronger relationships with independent agencies that are putting pressure on marginal companies. Moreover, the revenue of automobile insurance industry comprises of two main streams earned premiums and investment income, however, the higher portion of revenue consists of investment income earned through investing the premiums, which shows that insurance companies in the automobile market are relying on sub sources of revenue instead of basic revenue of earned premiums.


Progressive’s strategy to compete in the market place is its inducement of information technology to keep a check and balance on the insurance claims along with the first mover advantage in the industry to bring the information technology .........................................

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Consumer auto insurance is price-sensitive industry where customers rarely pay the supplier for even more service opportunities. Progressive is spending more money on additional features than its competitors, consumers do not pay extra for these features, but the company makes money on the products of competitors often do not. Central progressive success is its ability to () to turn on the operating costs of value added services and (b) use their unique competencies through thoughtful design services. Progressive examines national deployment Autograph, pay-as-you-go insurance proposals that have recently successfully completed a pilot in Texas.
rewritten version of the previous case.
used as part of the second module of the course to regulate operation of the service, which is considered a model of sustainable design services (606-031). "Hide
by Francis H. Frey, Hanna Rodriguez-Farrar Source: HBS Premier Case Collection 20 pages. Publication date: 08 May 2002. Prod. #: 602175-PDF-ENG

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