Revolutionizing Car Insurance.

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Author: Unknown

Quixotic as it may seem, Peter Lewis is working to create "customer delight" for auto insurance buyers. As Exhibit One, he's got a five-year-old claims program called Immediate Response, aimed at reducing the trauma of accidents. After one of these occurs, Progressive tries to get its adjusters to a policyholder's door within hours of the trouble being reported or, better yet, to the accident scene while the rubber's still scorching.

Speed helps the policyholder deal with this nasty, or even catastrophic, disruption in his life. It also lets Progressive get a quick, precise fix on the damage done and move, in many cases, to a quick--and lawyerless--settlement.

Accidents, of course, tend to occur at odd hours; more than half, in fact, take place during morning and evening drive times and late on Friday and Saturday nights. So, to accommodate the real world, Progressive put in a 24-hour claims-reporting service--if a policyholder calls at 3 a.m., a live person takes the accident report--and put its claims adjusters on an extended-workday schedule. Nowadays, the adjusters more or less live in Ford Explorers, taking calls from central dispatching offices and heading either to the homes of policyholders or to the accident scene itself.

Progressive's Bruce Marlow says that the job of converting to a 24-hour system was "wretched." Employees accustomed to the easy life had to accept all-hours routines. Computers that weren't "up" at 3 a.m. had to be geared to accept accident reports on demand. Policyholders, though they were provided with Progressive "gold cards" that told them what to do, didn't grasp that they could fruitfully call in the wee hours. Says Marlow: "Our phones didn't ring. We were like a public TV station during a fundraising drive."

But now the system sings. Bob McMillan, president of Progressive's Florida division and national head of its claims process, says that an average of five business days used to pass before a claims rep got to a policyholder. Today? "There's an 8-out-of-10 chance we'll be in your driveway in 24 hours and be ready to give you a check."

The opposite end of Progressive's feed chain, the buying experience, is likewise being transformed because a few years ago Peter Lewis ditched his assumption that the car insurance market was intensely competitive and listened instead to consumers complaining that they couldn't easily do comparison shopping. So today, in three states--Florida, Ohio, and Texas--the company is running ads asking residents to call Progressive on 1-800-AUTOPRO to learn what four insurers have to offer the caller in rates. Progressive gets its competitors' price data from public rate filings and picks market leaders to talk about. In Florida, for example, it quotes rates for State Farm, Allstate, Nationwide, and itself. And--surprise!--Progressive often has the lowest rate.

Even if its price is slightly higher, the customer may choose to pay it out of gratitude for having been provided such friendly service. Last year written premiums in the three states that offer Express Quote rose by 44%, compared with a gain of 30% elsewhere.

The program has broad implications for Progressive. First, it converts the company from niche player to full-line seller. Second, a customer can go to an independent agent to buy a Progressive policy or stay on the phone to buy direct. Thus, Progressive is partially transforming itself into a direct marketer that, like USAA or Geico, avoids commissions to middlemen. The company's direct sales are still small--just 15% of the total in Florida last year--but this is a distribution alley of real promise.

Because some states don't require insurers to publicly file their rates, there are limits to how quickly Progressive can expand Express Quote. But Lewis considers the program still under test anyway. His caution reflects some past disasters, among them big losses in 1988 and 1989 on insurance sold to truck fleets. But the testing also springs from the Progressive culture, which holds that there's no sense launching a program until it's totally bug-free. "And when we've got it right," says Marlow, "there's no one that can stop us."

Certain Wall Streeters may label that hubris, since they worry that Progressive's drive for growth is causing it to underprice. Nonsense, says Lewis. History, he contends, proves the company knows how to brake growth if it begins to threaten an underwriting profit.

PHOTO (COLOR): Brought to the accident scene by a call from a Progressive policyholder (right), Tampa claims rep Tom Cannington (left)issued a check to the claimant, arranged a rental car for him, and summoned tow trucks for both of the damaged vehicles.