Itlscm Gurjeet Bhatia - Indore

INDIVIDUAL ASSIGNMENT

INFORMATION TECHNOLOGY IN LOGISTICS

&

SUPPLY CHAIN MANAGEMENT

TOPIC

e-BUISNESS STRATEGY IN PROGRESSIVE INSURANCE:

Creating Value via Mobile Field Service

Faculty : Prof. Ashis K. Pani

Name : Gurjit Bhatia

SMS ID : 101903

Batch : PGCLSCM-3

Centre : Indore (M.P.)

GURJEET BHATIA-INDORE

e-Business Strategy in ProgressiveInsurance

Creating Value via Mobile Field Service

ABSTRACT
It is no secret that in every industry, consumer expectations are climbing. To meet these

increased demands, companies need to run their business operations more efficiently. The

current field service processes are loosing their ability to deliver first-rate customer

service. To solve this problem, companies are beginning to invest in mobile field service

processes that can serve customers faster and make it easier for customers to do business

with them.

Progressive Insurance is widely considered a best-practice company in customer

Service. For some time, the company has been relentlessly executing against the focal

Point of being “Easy To Do Business With.” In order to live up to this reputation,

Progressive is an early adopter of and heavy investor in technology.

KEYWORDS

Mobile Technology, Claims, Insurance, Customer satisfaction, Customer service


INTRODUCTION
INDUSTRY BACKWORD
Founded in 1937, The Progressive Corporation is the fourth-largest auto insurance

company in the United States, with more than 8 million customers. The Progressive

Corporation acts as an insurance holding company for 69 subsidiaries, one mutual

insurance company affiliate, and one reciprocal insurance company affiliate. The

company's subsidiaries and affiliates sell personal automobile insurance and other

specialty property-casualty insurance and related services. (Property-casualty insurance

protects customers from costs incurred from collisions and physical damage to their

motor vehicles and from liability to others for personal injury or property damages from

using other’s vehicles.)

DESCRIPTION OF BUISNESS
Personal Lines This segment writes insurance for private passenger automobiles, as well
as recreational and other vehicles. Private passenger automobile insurance comprises
preferred, standard, and nonstandard automobile risks. The first two account for about
80% of the U.S. personal automobile insurance market, while the third accounts for the
remaining 20%. Progressive actively participates in the market for each of these risks,
with the objective of offering a competitive rate for all risks. In addition to automobiles,
Progressive also offers specialized personal line products for motorcycles, recreational
vehicles, mobile homes, watercraft, snowmobiles, and similar items.
Other Businesses The company's other lines of business include the commercial vehicle

business unit, lenders' collateral protection group (LCPG), professional liability group

(PLG), and motor carrier business unit. These businesses collectively contributed

approximately 12% of 2002 revenues.


Distribution Channels Progressive either directly writes the personal lines insurance

itself or indirectly sells policies by an agent or broker. The company’s agent channel

spans a network of more than 30,000 independent U.S. insurance agencies, as well as

insurance brokers in several states and other strategic alliances. Progressive also uses its

agent channel to form alliances with other insurance companies, financial institutions,

employers and national brokerage agencies.

Direct business includes business written through 1-800-PROGRESSIVE, the company

Web site, and on behalf of affinity groups. Progressive’s strategy is to become the low-

cost provider of a full line of auto insurance products and related services, distributed

through whichever channel the customer prefers.

Progressive’s Focal Point — Becoming “Easy To Do Business With”
Always an innovative insurer, Progressive wanted to make it easy for average people to
protect one of their most important investments — their vehicles. Progressive was the
first to allow customers to pay their premiums in installments an option that appealed to
workers who could not afford annual premiums.
ADVANCEMENTS OF COMPUTING ENVIRONMENT (ICT use)
The company set a new standard for customer service in 1990 when it introduced, in

combination with a full range of personal auto insurance products, the Immediate

Response claims service, which is available 24 hours a day, 7 days a week. Help was just

a phone call away, any time of the day or night. Progressive’s claims representatives,

traveling in Immediate Response Vehicles (introduced in 1994), could even come right to

the scene of an accident.
The year 1992 brought 1-800-AUTOPRO, a cutting-edge auto insurance rate comparison
shopping service. No longer would customers have to spend endless amounts of time


Calling around to compare auto insurance rates. One phone call to AUTO PRO would
give customers a Progressive quote and comparison rates for up to three competitors. If
the customer was satisfied with the Progressive quote; he could buy the policy directly on
the phone or locally through an independent agent.

In 1995, the company stepped into the future with the launch of its Web site and became

one of the first major auto insurance companies to establish a presence on the Web. By

1997, Progressive was offering real-time online sales of auto insurance to its customers.

Taking this one step further, Progressive made it possible for customers to manage their

policies online by making payments and changing coverage.

In 2000, the company introduced its customers to an easier way to get their cars fixed

after an accident. The aim of this new service is to lower the customer’s anxiety level,

which is invariably at its highest after the person’s car is damaged.

Customers can now bring their vehicles to Progressive’s new claims centers directly

following an accident and pick up a rental vehicle. Progressive will prepare the estimate,

choose a qualified repair shop, and inspect the vehicle after the repairs are done. This

service has reformed the vehicle repair process, raised consumer satisfaction, increased

company productivity, and improved the cycle time and the quality of repairs.

MOTIVATING FACTORS
WHAT CHANGED?

Initially slow to change, the decades-old auto insurance industry is finally beginning to

adopt new technologies, namely wireless applications. Onboard and mobile technologies

create a tremendous amount of possibilities that can benefit insurers and customers alike.

In addition, the relative cost of this technology is becoming more affordable and, as a

result, more companies are able to effectively utilize it. Claims processing, field force


automation and policy pricing are just a few of the areas that can directly and quickly
benefit from the integration and use of wireless applications.

PROBLEM STATEMENT

According to the Insurance Information Institute, insurers spend approximately $180

billion in claims payments each year. For every dollar spent on auto insurance, roughly

34% goes to claims processing and other claims-related costs (see Figure ). While many

Auto insurers have focused on reducing payments for injuries, damage, and operational

expenses, very few have found successful solutions for driving down the costs of claims

and claims processing.

$.34 Claims &
Claims-Related
Expenses

$.24
$.50 Payments for operational
Injuries and Expenses
Damage

Total = $1.08*
*Includes interest, dividends,
and realized capital gains.

Figure: Dollar Cost Breakdown in the Insurance Industry

A claim is generated every time an unforeseen accident occurs. Whether drivers are rear-
ended in stop-and-go traffic, caught in an unexpected hailstorm, or sideswiped in a

parking lot, all the incidents result in a new claim being filed. While the damage may

only take a fraction of a second to occur, the chain of events that subsequently unfolds in

processing the claim could take months or even years to settle. Lengthy settlements

rarely pay off for the consumer and usually result in increased frustrations and bitter

feelings toward the insurer. By shrinking the claims processing time frame from months


to hours, the company can boost customer satisfaction and long-term loyalty. Companies

can take a traditionally burdensome and exasperating process and turn it into a helpful

and satisfying customer experience.

Additionally, lowering the high cost of claims processing can immediately affect an

insurer’s bottom line and allow the company to sustain a competitive advantage. Yet,

because of antiquated mainframe systems, slow-to-change work processes, and the

perceived high cost of alternatives, many insurers have been slow to take advantage of

technologies that could improve the claims process.

Claims have traditionally been a bumpy and difficult process for both customers and

insurers. Documentation requirements, company policies, and unexpected circumstances

often combine to complicate and delay claims fulfillment (see Figure). Other factors

such as lawyers and appraisers only add more obstructions. Claims agents find

themselves overloaded with work and sometimes inconsistently addressing similar

claims.

Figure: Insurance Claims Processes


Even the process itself can create problems of its own. Once a claim is made by a

policyholder, the claim is assigned to an adjuster, who alone is responsible for

interviewing the parties involved, inspecting the vehicles, and settling the dispute.

Because adjusters handle so many claims at once, and because they work a conventional

nine-to-five day, claims can languish for days in an in-basket before they are addressed.

Rather than provide great customer service, overwhelmed insurance adjusters Shuffle

Mountains of paper and make their customers wait on the phone for the “next available

adjustor”. Tenuously connecting this lengthy and cumbersome process is tons of

bureaucratic red tape. Forward steps cannot be taken until all previous steps are

accurately satisfied. Claims adjusters are rarely given the autonomy to solve problems or

develop innovative ideas to get around potential obstacles to save time and money.

Meanwhile, customer service is nonexistent.

Policy Pricing and Segmentation

The auto insurance industry has been debating the use of variable-based pricing criteria

for decades. Until now, no cost-effective, accurate, and sophisticated tools were

available to allow any insurer to test and validate its worth. Most models for

underwriting and rate pricing are weak or inflexible.

Some insurance companies rely on actuarial analysis of their customers to enable them to

Assess risk. They are able to further divide their various segment populations, for

instance, safe groups within the 18-25-year-old drivers who are lower risks, such as those

who have Ph.D.s. Other insurers have already decided what rules they will use to

determine if an applicant is eligible for insurance. Either a risk fits the company's criteria

Or it does not. If a particular risk does not qualify, the customer will have to change to
meet the insurer's standards, or shop elsewhere for coverage.


Consumers expect insurance rates to vary widely — even by hundreds of dollars — from

company to company. Prices for the same coverage differ primarily because insurers

Have varying claims experience and different costs of doing business. Auto insurance is

priced to cover the costs of accidents that may happen in the future. Companies cannot

predict the future, so they use information based on their past claims experience. Since

each company has different claims experiences, their rates will vary widely. Likewise,

each company's financial goals and costs of doing business (how much they pay to sell

and service policies) are different, resulting in the price discrepancies. In simple terms,

auto insurance companies price policies to cover accidents, claims, building leases, and

other claims-related costs, as well as non-claims expenses such as customer service

salaries, advertising, and the price of selling policies.
The consumer is at the losing end of this pricing structure, which traditionally leaves very

little room for flexibility and places drivers in few categories and rate scales. Desirable

drivers are rewarded for a clean driving record, while risky drivers are punished with

high premiums. As a result, insurers themselves have segmented into carriers that cover

different types of drivers. Many auto insurers refuse to cover drivers considered to be

“High-risk,” while other companies specialize in insuring those drivers.

e-BUSINESS ROADMAP
Clearly, there is a strong business case to be made for improving the claims process

using cutting-edge technology to control decreasing margins, rising costs, and increasing

competition.

While insurers have implemented technology in various degrees, few have turned to

mobile technology tools for their claims adjusters. Mobile will help in the following

ways:


• Improving Adjuster Utilization Efficiencies gained through adjuster initiatives can be

Easily measured and provide a high ROI. If adjusters can be reached throughout the day

(anywhere and anytime), additional appointments can be made on the fly, resulting in an

increased caseload. The customer’s information and location can be transmitted to an

adjuster's mobile device that directly links the adjuster to the policyholder. In addition,

if online access is granted through a wireless component, directions to the site can be

gained through a resource such as Map Quest. Such connectivity not only affects the

ease with which an adjuster handles daily workloads, it starts a domino effect of

efficiency throughout the organization.

• Reducing Call Volume Expediting the claims process translates into a direct decrease

to the large volume of calls that customer service representatives receive. If claims are

handled more quickly, customers will call less frequently with inquiries about their

status. In addition, with tools such as e-mail and instant messaging services

communications, a customer can be updated on her claim’s status instantly.

• Enhancing Accuracy of Data Another benefit of enabling claims adjusters to enter
information in real time is that, not only is the arduous task of data entry from paper
(and the mistakes that occur when it is entered) eliminated, but carriers become equipped
with a very robust database of information that is updated in real time.


DESCRIPTION OF STUDY SOLUTION
True to its reputation as an innovator, Progressive has been an early adopter of and heavy
investor in information technology. When the wireless wave came along, the company
was predisposed to think about how it could use wireless technology to its advantage.
Progressive decided to use mobile technology to tackle four major problems in the auto
insurance industry:

Claims Processing, Field Force Automation, Variable Pricing and Customer Satisfaction.

Mobile Claims Processing and Field Force Automation
At the heart of Progressive’s innovative business performance is Immediate Response, its
Speedy claims service. Before implementing Immediate Response, Progressive’s claims
Process was inefficiently and lengthy. Today, its representatives are available 24x7.
When an accident is called into Progressive by one of its policyholders, an adjuster is
Dispatched to the accident scene with a laptop, intelligent software, and the power to
Make on-the-spot decisions. The result is faster, less expensive and more profitable
Service. In fact, Progressive can perform several tasks at the scene of the accident that
Would normally take other insurers weeks, or even months, to complete (see Figure).

Figure: Transactions in the field

The Mobile Claims Process. The first step of Progressive’s Immediate Response claims

Process is designed to be quick and flawless, with a continuous flow of information
between the customer, Progressive's central database, and the local claims operation.
When a claims representative is dispatched to an accident site, the corresponding claim
number is radioed to the rep, so the customer’s policy and information can be
downloaded onto the rep’s laptop. However, this smooth hand-off did not become
possible until Progressive's Information Systems department developed Claims
Workbench, the software behind the hand-off. Initially, reps relied on cell phones to
execute Immediate Response. They had to call dispatchers repeatedly to relay data or to
retrieve coverage information from the mainframe. If reps did not return to the office
right away to update a file with their estimate, the job would not get done until the end of
the day or the following morning.
With more than 2,000 Immediate Response Vehicles (IRVs) on the road nationwide

(Progressive’s now famous white vans with the company logo painted on the side) being

dispatched to accidents, repair shops, and salvage yards, Progressive had to reinvent the

claims dispatching process. Its solution was to enable each vehicle with a wireless laptop

and digital camera. Now, the IRVs can respond to any accident within moments of a
Customer’s first call to report an accident (see Figure).

Figure: Progressive's Mobile Claims Architecture

In fact, the IRVs are constantly on the road looking for accidents. Progressive has shown
Up at the accident scene, processed the claim form, and handed the insured a check all
right at the crash site.

Mobile Pricing and Customer Satisfaction

To maintain its competitive edge, Progressive is adopting innovative pricing models.

One approach is to capture real-time customer driving behavior data. In August 1998,

Progressive began testing a new product that bases auto insurance premiums partly on

when, where, and how much a vehicle is driven.

The product, Autograph, requires the installation of a GPS device, a cellular phone, and a

crash data recorder in the user's car. A recorder in the Autograph equipment tracks the

car's movements every six minutes. Once a month, the company's computer calls the car

to find out where it has been. This information is then used to set the premium for the

month. At the month's end, customers receive a bill that charges them for their actual

driving histories (see Figure).

Figure: The Autograph GPS Tracking System

The Autograph program sprang from Progressive’s reasoning that its customers were less

likely to get into an accident driving in rural, remote areas than heavily trafficked

Interstate metropolitan areas; accordingly, it developed a better database of risk using

mobile feedback and location sensitivity. At the same time, Progressive saw its


customer Relationships improve — its personalized portal let customers go in and see

their records, their driving history, and their relationship with Progressive.

With the Autograph system, some of the traditionally fixed consumer costs now become

Variable costs. Rather than use broad categories for its policyholders, Progressive can

take into account the average monthly distance customers drive, how safely they operate

their vehicle and where they commute. This shift can save the customer money; less

driving overall and less risky driving in particular can both directly reduce costs.

This type of pricing saves low-risk drivers from subsidizing high-risk drivers, allows

high-risk drivers the opportunity to improve their status through safer driving, and gives

customers more control over the type of policy pricing they select. Customers who used

Autograph in the test pilot program conducted in Houston, Texas, paid up to 25% less in

automobile insurance each month Additional Autograph features, such as tracking stolen

vehicles, gives customers a sense of personal security and were an added benefit of the

technology.
For Autograph to be successful, Progressive must effectively utilize the information

collected from customer tracking. Preferably, the company will use this information to

set its customers’ insurance premiums to match their risk and driving habits and placate

the fears some have about what the company could do with such private information .

Autograph technology gives Progressive a competitive advantage over the insurers not

using similar technology and underwriting techniques. Progressive could more

accurately identify and attract low-risk, low-mileage drivers, leaving higher-risk drivers

to the other insurers. Deploying this sophisticated technology to get a better

understanding of its customers and the insurance market is consistent with Progressive's

strategy of staying ahead through a first-mover advantage.


Progressive has also put the power of mobile technology into the palms of its customers.

Recently, the company announced its latest online development: making auto insurance

services and information from progressive.com available on Web-enabled cellular phones

and hand-held devices from anywhere in the world, at any time. This technology gives

consumers even more control of their auto insurance policies and information .Once

again, Progressive is the first to adopt and deploy technology that helps simplify the auto

Insurance industry from the customer’s perspective.

To help make this project work, Progressive is using Wireless Application Protocol

(WAP) technology to allow Web-enabled phone and hand-held device users to log on to

progressive.com. early wireless functionality from progressive.com includes the ability

to locate a nearby independent agent by entering a zip code, to contact the company to

report a claim, to receive an insurance quote, and to service an existing account.
Future developments may include enabling customers to view information about

accounts, coverage, and vehicles and even be reminded when repairs are complete at an

auto body shop. The company has made significant investments and must carefully

examine the cost/value of being first.

Strategic initiatives cannot be realistically pursued-or even funded-without steadfast

support from the executive suite. The degree to which a strategic mobile data initiative is

successful, or fully implemented, can be traced to the level of commitment that exists

with VP and C-level executives.

OUTCOMES
Tangible Benefits

With the help of the wireless modem and laptop, the program allows reps to perform up

to 20 separate transactions in the field — everything from entering police-report

information to downloading specific car part costs and repair estimates. The ability to

instantly move information back and forth between a laptop and a mainframe and keep

claims moving toward resolution gives Progressive a major marketplace advantage.

Furthermore, the company’s Immediate Response service has boosted profits through the
elimination of inspection and repair delays, improved customer morale, decreased risk of
Fraud, and lowered monthly premiums.

Intangible Benefits

Wireless technologies also afford Progressive several intangible benefits:

• Extending the reach of the company, allowing it to mobilize more workers and
move service delivery closer to the customer,
• Permitting the company to provide more personal, face-to-face service to
customers through location services,
• Giving mobile workers more account-specific information to enrich
customer interactions,
• Fostering greater and quicker communications between company personnel
and customers,
• Allowing mobile workers to offer more services and conclude more transactions
in Real time,
• Expediting the dispatch and provisioning of service from field workers, and,
• Providing more accurate, convenient, and streamlined service by collecting data
at the Source and eliminating rekeying steps.
Strategic Benefits
Progressive's vision was to collapse the cycle time for claims processing by going right
to the vehicle to process the claim. Ultimately, this will reduce exposure to litigation,
the company’s loss adjustment expense, and the length of time its clients are forced to
rent a car.

Some customers and consumer groups have raised concerns over Progressive’s use of

Autograph. While the company maintains that the information gathered is used strictly
for deciding insurance rates, some fear what could happen if the information got into the
wrong hands. Could the information be sold to third party groups who are interested in
your shopping habits? Does Progressive have a moral or legal responsibility to divulge
information if one of their customers is accused of committing a crime while driving?
And consumers need to consider the trade-off: are potentially lower rates worth more
than compromising personal privacy?

LESSON LEARNED

SPECIFICS TO COMPANY

In the extremely competitive insurance industry, constant improvements in customer
service are critical to value capture. In addition to significant initial and ongoing cost
savings and the increased productivity by reducing drive time and eliminating steps in the
communication and documentation processes, Progressive has derived many other
benefits from its mobile solutions.
• Increased efficiency — Representatives have time to call on additional customers and
Provide timely follow–up due to self-service.

• Improved customer response — Dispatchers communicate in real time with adjusters
in the field and have access to up-to-date and historical customer, vehicle, and fleet
information — all at the touch of a button.
• More calls completed on the first visit —Adjusters have on-site access to technical

Data and inventory information, such as diagnostics, schematics, and diagrams. The

Need to carry manuals and customer lists was eliminated.
• Improved payment cycle — Checks are automatically initiated as soon as jobs are

Completed.


• Up-selling and cross-selling insurance policies — Progressive proactively notifies

Customers of quick quotes or rate changes and helps them calculate how much

coverage they need.

The Progressive Corporation is taking a long-term strategic (rather than tactical)

approach to improving customer service. Progressive is investing in mobile

technology to acquire, serve, and retain customers. The investments are wringing out

inefficiencies from its customer-facing and back-office processes and directly

affecting the company’s bottom line.

Progressive Insurance is deploying mobile field service to streamline its claims

processes and boost customer satisfaction. Progressive’s claims representatives can

perform up to 20 different transactions in the field on a single site visit. In addition,

it highlights a potentially profitable application of mobile in one-to-one pricing of

insurance services.

The return on investment (ROI) from technology investments is quite positive.

Progressive is growing much faster than the rest of the auto insurance industry, and

enjoys profit margins of 8%. This is in stark contrast to its peers, which have been

losing money due to underwriting losses over the past few years.

TRANSFERABLE TO OTHER COMPANIES/MANAGERS

The Progressive case study is a testament to the competitive advantage that companies

derive from taking an unconventional approach. The end result is impressive:

Progressive is growing much faster than the rest of the auto insurance industry — its

market share has grown 4.5% over the past 10 years while many other insurers are

struggling to maintain their customer base. Its net income in 2002 rose 62%, to $667

million, on revenues of $9.5 billion, up 30% from the previous year.


The Progressive Corporation has streamlined the claims process within the automotive

industry so much that it may be unrecognizable to longtime drivers who are used to

waiting months to be reimbursed for a claim. Other insurance companies can also follow

progressive insurance “brick-and-click” model i.e. Progressive equips its agents with

wireless laptops and a complete claims workbench; the agents are dispatched to accident

sites by the call center; the agents coordinate the required services (tow truck, car rental,

body shop); and the agents conduct a damage assessment and cut a reimbursement check

on the spot — all of which can be coordinated in minutes.

Customer service is vital to value creation in the insurance industry, particularly in auto

insurance, which is highly competitive. Despite the focus on customer service, customer

satisfaction levels are at all-time lows, with claims and other critical customer-facing

processes bogged down by paper trails, missed phone calls, erroneous data, and other

process inefficiencies.

Mobile field force automation is a “must have” for insurance companies streamlining

their claims processes.

CONCLUDING COMMENTS
By adopting and deploying mobile technology, insurance companies can gain

lower claims costs, less litigation, greater efficiencies, and increased customer

satisfaction. Increased customer satisfaction results in improved customer

retention. In an industry where customer churn is costing insurance companies a

lot of money, this is a significant development.


E-Mobile technology is becoming a significant part of the insurance industry’s

landscape. Traditionally, insurance companies are used to dispatching adjusters

into the field to conduct inspections and start the claims process; thus, it is not

surprising that insurance field service claims adjusters have been early adopters of

mobile Technology.

Companies like progressive insurance that follows “brick-and-click” model are

far more successful than “click-and-click” model following companies and

definitely gets a competitive advantage in business.

Mobile field service applications have moved from the “nice to have” category to

the “need to have” category.

Mobile communications are on the cusp of the next big step, promising new

applications and services that will change the way people live and work. The

integration of the Internet, mobility and communications at the device, service

and transport level creates a new set of business opportunities. The business

challenge is bring together the three worlds with services that customers will pay

for.

The longstanding insurance industry can effectively reinventing itself through the

use of mobile technology.

Mobile technology can unlock value and deliver ROI through improved customer
service and reduced costs.

The intelligent use of mobile can potentially change insurance pricing strategies
forever.

THANK YOU FOR YOUR ATTENTION

Itlscm Gurjeet Bhatia - Indore

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