Innovation X by Adam Richardson

Author:Adam Richardson
Language: eng
Format: epub
Publisher: Wiley
Published: 2010-05-11T04:00:00+00:00

Progressive Insurance—Establishing New Ecosystem Components

Pure Digital shows the value of expanding an ecosystem’s boundaries and components (not just one’s reach within an established ecosystem, as Alltel did). Pure first created and then adjusted its ecosystems in response to unmet customer needs, allowing it to disrupt two fairly mature categories: digital cameras and camcorders.

Similarly, Progressive Insurance has gained ground against more established insurers by expanding the conventional ecosystem for car insurance in several ways that have obvious and also hidden benefits. First, Progressive uses its Web site as a means of attracting and serving customers. (The site famously quotes competitors’ rates, for example, and is the main interaction point for customers, rather than agents in offices). Second, Progressive has a fleet of white vans that are dispatched to help customers at the scenes of accidents. Both of these new ecosystem components came about through rethinking how to address unmet customer needs. But they also provide Progressive with competitive advantages that may not be immediately apparent.

Car insurance is a cruel business, in which customers regularly shop around to find the best price. They rarely have to use their insurance, and mostly when they interact with an insurer it is because of something unpleasant, such as paying the monthly bill or dealing with an accident. Without a continuous stream of positive interactions, flight of customers to other insurers is an ever-present risk. So why would Progressive encourage potential customers to go to other carriers (the price comparisons), or add costs to its services (the vans)?

In addition to being a delight for customers who find themselves in a stressful car accident, the vans actually save Progressive money. Fraudulent claims are frequent with auto insurance, so by sending a representative immediately to the scene of the phoned-in incident, Progressive can verify that it has truly taken place. This curtails fraud at the source rather than dragging it out over weeks and incurring large legal costs. Each representative in a van is equipped with a laptop and a wireless connection back to the company’s database, allowing more efficient gathering and input of data from the field. Progressive has invested heavily in wireless and IT and developed many custom systems; its IT staff has grown from a few hundred to several thousand in the last decade and is a core part of the company’s toolbox in a way unlike that of any other insurer.11

Quoting competitors’ rates is a more subtle ploy. Customers love the convenience of one-stop shopping for quotes, so Progressive is doing them a favor. But Progressive is not always the low-price leader—in fact half the time it isn’t offering the lowest quote. So why let potential customers know? Because Progressive believes that it is more accurate than other insurers at gauging a specific individual’s risk and setting premiums based on it. If the customer chooses Progressive, then Progressive has covered its costs. But if, as the competitive quote may encourage, the customer chooses a lower-priced carrier, Progressive has sent that costly and risky customer to a competitor.

Download

Copyright Disclaimer:
This site does not store any files on its server. We only index and link to content provided by other sites. Please contact the content providers to delete copyright contents if any and email us, we'll remove relevant links or contents immediately.