Progressive 2012 Annual Report Download - page 48

To analyze growth, we review new policies, rate levels, and the retention characteristics of our books of business. The
following table shows our year-over-year changes in new and renewal applications (i.e., issued policies):
Growth Over Prior Year
2012 2011 2010
APPLICATIONS
Personal Lines
New (1)% (1)% 7 %
Renewal 6% 7% 5%
Commercial Auto
New 3 % (2)% (1)%
Renewal 1 % (1)% (4)%
Our Personal Lines business had a slight decline in new applications in 2012, compared to last year. Growth early in the
year was more than offset in the second half of the year after we took rate increases. On a year-over-year basis, new
applications were flat in 2012 in our Agency auto business and decreased slightly in our Direct auto business. In addition to
rate increases during the year, we implemented changes in our bill plans to require higher down payments and reduced our
advertising spend, which also contributed to the decline in applications.
Our Commercial Auto business experienced an increase in new applications for 2012, compared to 2011, driven by an
increase in new applications in our for-hire transportation business market target and a significant increase in new
applications in Florida, our largest Commercial Auto state. We are committed to our advertising campaigns, product
enhancements, and brand-building efforts in order to stimulate new business in both segments.
We remain focused on providing consumers with distinctive auto insurance options. During 2012, we continued the rollout of
personal auto product models, which further refine our segmentation and incorporate the best design elements of the
Agency and Direct auto products. We introduced these models to five states during 2012, bringing the total number of
states to 44 plus the District of Columbia (“jurisdictions”) at the end of the year. We plan to extend the rollout to two
additional states in 2013, which will substantially complete the rollout of these product models.
Snapshot®, our usage-based insurance product, provides customers the opportunity to improve their auto insurance rates
based on their personal driving behavior. Snapshot was made available in four additional states in 2012. Snapshot is
available to our Direct auto customers in 44 jurisdictions, while our Agency auto customers have access to Snapshot in 39
of those 44 jurisdictions. We plan to expand Snapshot into additional states, depending on regulatory approval and
business results. We currently have six patents, and additional patent applications pending, related to usage-based
insurance. During 2012, the annual premium of customers accepting Snapshot exceeded $1 billion.
During 2012, we launched our national rollout of a program to offer consumers the opportunity to “test drive” Snapshot
without having to change their current insurance to encourage many more people to consider Progressive for their auto
insurance needs. Unfortunately, this program did not have the success we expected. We will enhance our marketing efforts
related to “test drive” during 2013 in an effort to increase consumer participation.
We are also continuing with our efforts to further penetrate customer households through cross-selling auto policies with our
special lines products and vice versa, as well as through Progressive Home Advantage®. Multi-product customers are an
important part of our strategic agenda, since they tend to stay with us longer, have better loss experience, and represent a
sizable segment of the market. We have additional opportunity for growth in this area.
Progressive Home Advantage, the program in which we “bundle” our auto product with property insurance provided by one
of several unaffiliated insurance carriers, is becoming an integral part of our consumer offerings. As of December 31, 2012,
this program was available to Direct customers in 48 states, Agency customers in 22 states, and to both Direct and Agency
customers in the District of Columbia. Progressive Home Advantage is not available to customers in Florida and Alaska.
During 2012, we acquired a non-controlling interest in the corporate parent of American Strategic Insurance, our primary
Progressive Home Advantage provider for Agency customers. We are actively promoting Progressive Home Advantage to
independent agents.
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