Progressive 2006 Annual Report Download - page 8

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Three years ago, I wrote that 2003 would be the second year of
underwriting profitability in the auto insurance industry for the past
25. Since then, the industry has gone on to four consecutive years
of underwriting profitability. Based on where we start 2007, the odds
look good for a “five-peat” (I hope that’s not trademarked!). With
favorable underwriting results and a stable outlook, the competition
for consumers has increased dramatically. With consumers in
demand, price pressure was sure to follow. While simple character-
izations about pricing don’t capture individual market and segment
level detail, a second notable macro change is that the industry-
wide earned premium for 2006 may well be lower than 2005, a first
in at least 25 years.
An Auto Insurance Commercial Every Fourteen Seconds!
This was an interesting factoid gleaned recently dur-
ing the course of evaluating advertising agencies.
Without validating the claim, directionally it captures
one of the most observable macro changes in our in-
dustry over the past few years. In 2006, few consumers
escaped an auto insurer’s message as just about every
conceivable impression space has been used to cap-
ture consumers’ interest. Why now? What’s changed?
Letter to Shareholders
expectation satisfaction