Progressive Insurance has risen from modest beginnings since being founded in 1937. After its 1986 IPO, it has delivered 20.5% CAGR vs 9.9% by S&P 500. Personal auto insurance (with specialty lines of watercraft, RVs, motorcycles) remains the biggest revenue source. Already highly ranked on the Fortune 500, it kept delivering consistent results over last few years. Among its many firsts, it pioneered selling directly over the internet in the late nineties. Subsequently, Progressive has catapulted from #15 to #3 in North American private auto insurance.
Usage-Based Insurance is an important element of Progressive’s strategy. Berkshire Hathaway Vice Chair Jain did a head-to-head profit comparison between Berkshire’s GEICO auto insurance and Progressive, noting that GEICO had fallen short on both growth and margins because it had “missed the bus, and was late in appreciating the value of telematics”, along with the value of matching rate to risk. Progressive was a first mover in modern telematics with TripSense in 2004, its pilot initiative in the U.S. It introduced its pay-as-you-drive Snapshot program in 2008. Insurance market analysis by Credit Suisse estimated that Progressive’s telematics-based auto insurance policies are 15-25 percent more profitable than non-telematics policies.
They wrote about $31 billion in private auto premiums, third-most behind State Farm Mutual and GEICO in 2019. Progressive also increased its share of the market to 12.2%, closing in on GEICO and enjoyed a decade of rapid growth, more than doubling private auto written premiums since 2010.
In the 15 years leading to December ‘19, Progressive’s sales and profits grew at increasing rates, culminating in a 3 year stretch in 2019 when EPS compounded at 56.2% p.a. One reason why Progressive has performed so well is its early investments in telematics. Progressive has expanded telematics into its commercial insurance policies — offering discounts to companies that share driving data. The strategy has paid off handsomely, with a combined ratio below 100 since 2000, and below 95 since 2016.
Drivers download a Snapshot application and allow the carrier to monitor their driving for individualized underwriting. Good drivers pay less. The company attracts good drivers via UBI and retains them via bundling. Currently, Progressive is implementing UBI in commercial auto, in a program called Smart Haul.
As part of its bundling strategy, “The Robinsons” have been a preferred group who bundle auto with home and have an agency bias. The subgroup accounts for ~40% of premium and differs from other targets – “Diane”, “Wrights”, “Sam” – with higher retention and lifetime value. While Progressive’s growth is rooted in direct distribution, it outperforms peers in agency business, particularly versus captives.
Progressive sees commercial auto as its next big growth opportunity. Already the #1 commercial auto insurer, it covers fleets up to 40 vehicles and Transport Network Companies (e.g. Uber, Lyft). Its acquisition of Protective Insurance further strengthens this segment. In 2020, commercial auto generated 12.4% of premium. Commercial auto customers are offered additional coverage such as business owners’ policy. With Protective, worker’s compensation is added to the list.
Since 2015, Progressive is underwriting property lines as well, mostly homeowners but also renter’s insurance. As the property line is still unprofitable, there have been multiple corrective actions which have led to Robinsons contributing noticeably due to increased retention. Progressive has a laser focus on retention, reports policy life expectancy and considers bundling as key to retention. The total book of Robinsons has kept growing over the years.
Progressive has been on the UBI bandwagon for a couple of decades and is dominant in personal and commercial lines. Smart Haul has also been profitable due to savings for truckers. Usage-based insurance has been surging in the US insurance sector and every wave of change has found Progressive at the leading edge. A substantial increase in the Total Addressable Market and lead in telematics vis-à-vis competitors augurs well for its ability to keep growing profitably.
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Progressive Insurance coverage has risen from modest beginnings since being based in 1937. After its 1986 IPO, it has delivered 20.5% CAGR vs 9.9% by S&P 500. Private auto insurance coverage (with specialty traces of watercraft, RVs, bikes) stays the largest income supply. Already extremely ranked on the Fortune 500, it stored delivering constant outcomes over previous few years. Amongst its many firsts, it pioneered promoting immediately over the web within the late nineties. Subsequently, Progressive has catapulted from #15 to #3 in North American non-public auto insurance coverage.
Utilization-Primarily based Insurance coverage is a vital ingredient of Progressive’s technique. Berkshire Hathaway Vice Chair Jain did a head-to-head revenue comparability between Berkshire’s GEICO auto insurance coverage and Progressive, noting that GEICO had fallen quick on each development and margins as a result of it had “missed the bus, and was late in appreciating the worth of telematics”, together with the worth of matching charge to danger. Progressive was a primary mover in trendy telematics with TripSense in 2004, its pilot initiative within the U.S. It launched its pay-as-you-drive Snapshot program in 2008. Insurance coverage market evaluation by Credit score Suisse estimated that Progressive’s telematics-based auto insurance coverage insurance policies are 15-25 % extra worthwhile than non-telematics insurance policies.
They wrote about $31 billion in non-public auto premiums, third-most behind State Farm Mutual and GEICO in 2019. Progressive additionally elevated its share of the market to 12.2%, closing in on GEICO and loved a decade of speedy development, greater than doubling non-public auto written premiums since 2010.
Within the 15 years resulting in December ‘19, Progressive’s gross sales and income grew at rising charges, culminating in a 3 12 months stretch in 2019 when EPS compounded at 56.2% p.a. One motive why Progressive has carried out so effectively is its early investments in telematics. Progressive has expanded telematics into its business insurance coverage insurance policies — providing reductions to firms that share driving knowledge. The technique has paid off handsomely, with a mixed ratio beneath 100 since 2000, and beneath 95 since 2016.
Drivers obtain a Snapshot software and permit the service to observe their driving for individualized underwriting. Good drivers pay much less. The corporate attracts good drivers through UBI and retains them through bundling. At present, Progressive is implementing UBI in business auto, in a program referred to as Good Haul.
As a part of its bundling technique, “The Robinsons” have been a most well-liked group who bundle auto with residence and have an company bias. The subgroup accounts for ~40% of premium and differs from different targets – “Diane”, “Wrights”, “Sam” – with larger retention and lifelong worth. Whereas Progressive’s development is rooted in direct distribution, it outperforms friends in company enterprise, significantly versus captives.
Progressive sees business auto as its subsequent huge development alternative. Already the #1 business auto insurer, it covers fleets as much as 40 autos and Transport Community Corporations (e.g. Uber, Lyft). Its acquisition of Protecting Insurance coverage additional strengthens this phase. In 2020, business auto generated 12.4% of premium. Business auto prospects are supplied further protection akin to enterprise homeowners’ coverage. With Protecting, employee’s compensation is added to the listing.
Since 2015, Progressive is underwriting property traces as effectively, largely owners but additionally renter’s insurance coverage. Because the property line remains to be unprofitable, there have been a number of corrective actions which have led to Robinsons contributing noticeably as a result of elevated retention. Progressive has a laser deal with retention, stories coverage life expectancy and considers bundling as key to retention. The whole guide of Robinsons has stored rising over time.
Progressive has been on the UBI bandwagon for a few many years and is dominant in private and business traces. Good Haul has additionally been worthwhile as a result of financial savings for truckers. Utilization-based insurance coverage has been surging within the US insurance coverage sector and each wave of change has discovered Progressive at the forefront. A considerable enhance within the Complete Addressable Market and lead in telematics vis-à-vis opponents augurs effectively for its potential to continue to grow profitably.
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