Innovation at Progressive

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Case Study: Innovation at Progressive 1. Progressive has a good performance if compared with other insurance companies. Why do you think this happens? [NOTE: I will use the term competitive advantage frequently. This term can be described as reason for a superior performance. Competitive advantages therefore explain why the company happened to perform better than its competitors.] Progressive’s good performance has mainly three reasons. First, its superior risk algorithms, second, the major shift to a customer-centric organization including the implementation of its fast service program and third, its high performing personnel. For an insurance company it is key to finely segment customers in order to give them appropriate rates. In 1956, Progressive has been one of the earliest to target the difficult non-standard (high-risk) market as it was able to price the risk more accurately than its competitors. In that time, Progressive developed its sophisticated algorithms and continuously added new information which lead to even more precise risk evaluations. While other firms mainly relied on zip codes Progressive used various data points, a better statistical analysis and an extensive software. This competitive advantage did not occur randomly since Progressive established a culture promoting the freedom to experiment. Accordingly, people were supported to constantly improve the algorithms and try to implement new information. After the effective date of the “Proposition 103”, Progressive showed again its capability of changing its strategy in order to better serve the market. While shifting from the non-standard to the preferred market, Progressive became a customer-centric company. This strategic change lead to an increase in market share to 4,8% (1999) during the 1990s. A major innovation in this context was the immediate response program which enabled the
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