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55 MPH speed limit repealed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