Progressive Insurance Essay

Chapter 6 Progressive delivers the unexpected – Progressive Insurance

Case description

It’s a steamy Saturday in Houston, a day so piping hot that one would gladly consider diving into a vat of Texas chili for relief. But chili is a messy business, so instead, half the population seems to have taken refuge in their air-conditioned cars, choking Houston’s freeways as a result. For Kristen Botello, all those cars mean just one thing: lots of accidents. She’s not rooting for wrecks. But she knows from experience that accidents happen. And when they do, she wants to be on the scene immediately – before the police arrive, before a wrecker tows away the cars. Why all the urgency? Because Botello, 28, settles claims for Progressive Corporation,
If the claimant is still at the scene of the accident, a mobile claims representative is sent in a company IRV (introduced in 1994) to begin the investigation and settlement. Today, more than 2000 of these vehicles, also called “office on wheels,” are equipped with a desk, fax, printer, computer, digital camera, cellular phone, and modem as an Immediate Response tool. Progressive strives to resolve all coverage and liability issues as quickly as possible so that the claims representative is able to cut a check to the claimant during this initial meeting. Willy Graves, Texas state manager, comments, “In about 20 percent of the first Immediate Response visits, we cut a check immediately.”14 As a result of its greater mobility, Progressive has experienced several advantages. First, by reengineering its claims adjustment process, it slashed the time required to process a collision claim from an average of 36 days to 12, cut its expense ratio from 33 to 24 percent of premiums, and increased income per employee by 70 percent.15 Second, the company designed its processes for agility, so as to respond to every aspect of the customer’s needs. This means handling calls on a wide range of issues. As shown in Table 6.1, the claims adjustment process can be reconfigured instantly to meet whatever the customer needs. Importantly, in order to respond easily and immediately
He joined Progressive almost the same day the company got its first punch-card machines. “The company was not early with computers,” he says, “but the obsession my father had, and later that I had, of thinking that we could always be better, and having the freedom to experiment – to figure out how – kept my eyes open.”21 As mentioned earlier, it took a consumer backlash in California in the late 1980s to put Progressive on its tech-driven path. In 1989, Progressive began to install a $28 million computer and nationwide voice/data system, which allowed faster communication between agents and shorter processing times for both applications and claims. By speeding up the claim processing, the new system enabled local agents to process 30 percent more claims.22 The claims processing network, called Progressive Automated Claims Management, allowed local agents to download information into the central computer from their terminals. Previously, agents had to mail reports between offices and corporate or divisional headquarters, a slow and cumbersome process. More recently, the company provided its agents in the field with ProRate, a proprietary system, to run on their agency system. All the information the agent gathers about the policyholder is sent to Progressive electronically. Agents keep the necessary paperwork for themselves. They can electronically transfer funds. The consumer technically has a paper policy, but the process is totally