progressive corporation (1984 93) team asian invasion
TRANSCRIPT
ENVISIONING STRATEGYMBAM 619
TEAM aSIAN iNVASIONHall Zhang
Kaustubh ThakurLance Kawamoto
Pranajaya SoedradjatRaymond Zhang
TYPE STENGTH OF IMPACT
MAIN IMPACT POINTSPOLITICAL 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
1980 19841982 1985 1990 199519881986
Government starts drunk
driving campaign
Introduction of MADD
Seat belt lawMinimum Drinking
ageIntroduction 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55 MPH speed limit repealed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
Imposes insurance requirements (mandatory except. FL, NH, WI)
Imposes general traffic rules
Controls vehicle registration
Controls who gets drivers license (e.g. Age)
Regulates Insurance companies, including product, distribution and pricing
Federal Power
Controls # of Highway Patrol and Policemen
Controls funds for interstate highways
Controls interstate commerce and transportation laws
Imposes transportation safety requirements
Impose laws on insurance, auto, and construction companies
Internal Changes External Changes
Centralized data baseAnd 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%
Industry sector and the NAICS two digit code:
52-Finance and Insurance
Industry sub-sector and the NAICS code:
524126-Automobile insurance carriers
HHI
Growth rate
1974-1983: 9.8%
1984-1993: 11.2%
• Industry profitability: – Underwriting profit: -4.1%, -7.2%– ROE: 9.04%
I nsurance
0. 00%2. 00%4. 00%6. 00%8. 00%
10. 00%
-8. 00% -6. 00% -4. 00% -2. 00% 0. 00%Profi tbi l i ty
Grow
th r
ate
I nsurance
Life cycle: growth.
The cycle of industry creative destruction:
recombinant market leaders.
CustomerInsurance
Company 3
Insurance Company 4
Insurance Company 2
Insurance Company 1
Insurance Company (Picked)
Price Comparison
CustomerInsurance
Company 3
Insurance Company 4
Insurance Company 2
Insurance Company 1
Insurance Company (Picked)
Customer Representative
Insurance Corporation
The Agent
Customer Hotline
Vendors
Customer
Customer
Inbound Logistics and Operations
Collecting and analyzing accident data to separate drives in to more
risk categories and price policies to match the underwriting risk
Seeking to offer a wider array of payment plans, limits of liabilities,
and deductibles than its competitors
Pursuing a very conservative investment strategy
Information and Communication Technology
Installing computers system and nation voice/data system
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.
Marketing and Sales
Using own sales force to call on agents
Introducing the express quote service
Toll-free number (1800-auto-pro)
Building “walk-in” customer service centers and “drive-in”
consumer auto insurance service center
After-sales service
Installing the “immediate response” system
Set a toll-free number that the claimant could call 24 hours, seven
days a week
Authorizing claims adjusters to write a check at the scene of the
accident
Investing a measurement system which enabled to record the time
elapsed every step from accident to claim settlement
Introducing cost containment programs Progressive offered a set of options that could roll back premiums by 12 to 20 percent.
Human Resource Management
Hiring young employees and trained them heavily and avoiding
hiring employees from standard insurers
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.
Demanding an extended-workday schedule for adjusters
Constructing a new headquarter which would aid employee
recruitment and retention