It's risky business, and Progressive loves it. Long a leader in nonstandard, high-risk personal auto insurance, The Progressive Corporation has motored beyond its traditional business into standard-risk and preferred auto insurance, as well as other personal-use vehicle coverage (motorcycles, recreational vehicles, and snowmobiles). Progressive also offers commercial policies for heavy trucks, vans, and lighter trucks. It writes a bit of professional liability insurance for directors and officers insurance of community banks. The company markets directly to consumers online and by phone, and through more than 30,000 independent agents who account for the majority of the company's business.
Progressive operates throughout the US and sells personal auto insurance on via Internet in Australia.
Personal insurance accounted for 84% of the company's 2012 revenues while commercial auto represented 10%. Other indemnity and service business accounts for less than 1% of the company's revenues. Progressive offers coverage to auto insurance customers, underwritten by third party insurance carriers. Progressive also offers personal umbrella insurance that provides coverage for the extras in life, such as personal injury and legal defense. The company had 13.3 million policies in force at the end of 2012.
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Its US customer service group (which support policy servicing, agency distribution, claims, and direct sales operations) are located at call centers in Mayfield Village, Ohio; Austin, Texas; Tampa, Florida; Sacramento, California; Tempe, Arizona; and Colorado Springs, Colorado.
The company’s revenues grew by 10% in 2012 thanks to higher net premiums earned, and net realized gains on securities, fees and other revenues. This growth was driven by higher rates (in both personal auto and commercial auto) and increased volume. Progressive added 460,000 policies during the year.
However, Progressive’s net income declined by 11% in 2012 due to higher losses and loss adjustment expenses, policy acquisition costs, and other underwriting expenses.
Organic growth lifted the company's revenues each year between 2008 and 2012.
Unlike some insurers who, in fat markets, earn more from their investments than their premiums, more than 90% of Progressive's revenues have historically come from policy premiums.
The company's actual insurance operations have remained profitable and grown as it has entered into new geographic markets and expanded distribution of its personal auto products online. Already among the leading US auto insurers based on premiums (just behind State Farm and Allstate), Progressive is aiming to be on top.
Because it is fairly easy for customers to switch auto insurers, Progressive competes on price and accessibility. To attract new customers the company's television ads featuring its perky spokesperson "Flo" have shot up the company's brand recognition. Operating on the premise that a few drivers are responsible for the majority of claims and that previous risk models were incomplete, Progressive is now also offering rates that are tied to actual usage. In 2011 it launched its Snapshot program to offer usage-based discounts. Snapshot customers plug a tracking device into their cars for a month; data collected by the device are used to determine the customer's discounted premium rates. While the product didn't take the market by storm in its first year, Progressive is betting that it will be a big part of its future.
To retain customers, Progressive is promoting its non-auto personal products through bundled packages with lower auto rates. Once a customer has bought a bundled package of home/auto/umbrella coverage, they are also much less likely to switch insurance providers.
During 2012 the company expanded its Commercial Auto coverage limits, offering $1.5 million and $2 million policies, and also expanded coverage for boat propulsion systems.