Progressive 2007 Annual Report Download - page 26

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A key operating tactic for Progressive is
to maintain leadership in the online per-
sonal lines insurance arena. Toward that
end, we redesigned progressive.com in 2007
to incorporate more interactive Web 2.0
functionality, more prominently position the
ability to find an agent, and incorporate
our new brand standards. We also elevated
the ability for our auto customers to have
virtually all of their policy forms sent elec-
tronically and continue to offer the ability
for customers to hear from us via system
generated text messages.
As we head into 2008, we are working to
improve our products and services for
those customers who intend to maintain
their insurance coverage. The most readily
apparent action taken to date is offering
customers non-vehicle related insurance
products, which creates the opportunity
for customers to bundle their insurance
products with Progressive. During 2007,
we added Umbrella insurance to our prod-
uct offerings in eight more states, bringing
the total number of states to 13. For Home-
owners insurance, we intend to employ
third-party providers and have integrated
their products into our offerings. At year
end, we had this capability available to
Direct customers in 46 states and for our
Agency customers in six states, with plans
for many more in 2008.
New business applications were up 2% in the aggregate, with a decrease in Agency
auto offset by increases in Direct auto and special lines products. Toward the end of the
third quarter, we restricted agent and broker production of new auto policies on unprof-
itable business in California and New York, which led to a decrease in Agency new auto
business applications of more than 5% in the fourth quarter. We are taking steps to
remedy the profitability issues and expect to accept new business within these areas in
the first quarter of 2008.
Shopping and quoting patterns for personal lines insurance continued to change in
2007. On the Direct side, an even greater proportion of customers are shopping and
buying online. While Direct auto new customer quotes were down for the year, in the
fourth quarter we saw a slight increase of new quotes versus the fourth quarter of 2006.
Expenditures on advertising rose 21% over 2006, led by a 75% increase in online Direct
advertising spend. Conversion of Direct quotes continued to improve, especially online.
In our agents’ offices, the shift towards quoting on vendor supplied multi-carrier quot-
ing platforms continues. Almost half of Progressive Agency quotes now originate from
multi-carrier quoting applications. While this shift in agent quoting method helps ensure
agents provide consumers more choices, it frequently positions us head-to-head versus
competitors based more on rate than on product and service differentiators. The frequency
of Progressive rates being quoted in agents’ offices increased in 2007, yet the conversion
of those quotes into policies declined.
Customer retention has remained our #1 priority in Personal Lines and we are pleased
to report that we are making headway. By year-end, both our Agency and Direct businesses
were enjoying average policyholder tenure levels greater than the same period in 2006. In
addition to more competitive rates,we implemented a number of process changes during
the year that positively affected customer experience. As previously reported, the Net Pro-
moter®Score (NPS) is our key measure of customer satisfaction. NPS was up notably across
our Personal Lines business over the course of the year.