Progressive Hopes to Drive Market Share With New Agency Brand

The agency segment will be marketed as Drive Insurance from Progressive beginning in December. Drive will have its own logo and a Web site with a “find an agent” feature. Television ads will be road-tested in Florida next month and aired nationally starting in January 2005. The company has hired the New York advertising firm of Ogilvy & Mather to design its advertising campaign, which will include TV spots on cable channels with upscale audiences, such as the History Channel, ESPN and A&E. The new slogan: “Relax. Just Drive.”

Progressive is best known for extensive national branding of its auto insurance that is sold direct, both over the phone and online. But it is also the largest writer of auto insurance sold through independent agents. Drive is an attempt to take the same branding approach it uses in marketing its direct sales and apply it to the independent agency side. Company officials unveiled the new branding campaign before 1,200 of their largest agencies at a gala event in Las Vegas last month.

“Since we began advertising in the early ’90s, agents have told us they value our brand building activities but they’ve wanted to participate more actively in them,” said Bob Williams, agency group president for the Mayfield Village, Ohio-based insurer. “Drive Insurance from Progressive is designed expressly for our independent agents and brokers. It leverages Progressive’s brand equity while highlighting the value that independent agents and brokers provide.”

According to Williams, captive insurers now grab the majority of the $120 billion auto insurance market. Progressive has about $10 billion and wants more. “We want to continue to grow,” Williams said in an interview with Insurance Journal. The insurer hopes to grow by grabbing more market share through its independent agents, he explained.

Williams offered that the company’s independent agency side, despite its growth, has been constrained by the direct side because consumers don’t associate Progressive with independent agents as strongly as they do with phone or Internet sales.

He also acknowledged that the company’s research uncovered that independent agents question the company’s commitment to the agency system.

Drive is an attempt to change the minds of both consumers and agents by combining Progressive’s claims service, high technology and marketing experience in a program that touts the value of using independent agents. He said the company has been studying this for two years.

While consumers may be won over by the branding effort, it remains to be seen whether agents will be. Independent agents generally praise the company’s technology, easy processing and claims service, but they also complain about Progressive, mainly about low commissions (between 8 and 10 percent on average) and fears over the direct side poaching business from them.

A number of agents remain skeptical about Drive, telling Insurance Journal privately that the new plan does not address their concerns.
Two stories about the move posted to www.InsuranceJournal.com in late September drew more than 100 strong comments.

Steve Atwell at Georgetown Insurance Services in Silver Spring, Md., is among those with strong feelings and is not at all enthusiastic about Drive. In fact, he thinks it’s “dead-on-arrival” because it fails to address the commission issue, he told Insurance Journal in an interview.

“Everything they do is ‘progressive’ except pay their agents,” Atwell said, adding that he is not going to write good business for 10 percent commission when another company will pay 15 percent. “We have bills to pay,” he said.

Paul Improta, owner of the Underwriters Inc. agency in Stamford, Conn., told Insurance Journal he doubted he’d write more business with the company for a very simple reason. “They don’t pay us,” he said. “Sometimes it’s not even worth getting paid to have the clients they target,” Improta continued. “They tend to be walk-in people who bring their money with them, and we have to write a check against it. It’s more labor-intensive business in addition to being low compensation.”

A number of agents volunteered a possible solution: Progressive should give agents some of its advertising money and let agents do the sales and marketing, which is what they do best.

That’s not going to happen, according to Williams. “We feel like we pay a fair commission,” the agency business president said, adding that Progressive is sticking with its strategy of being a low-cost provider. While there are no plans to cut commissions, neither are there plans to raise them. Williams is counting on agents being happy over the increased volume of business they will get through Drive.

Progressive has 30,000 agents and is not necessarily looking to increase that number. But the company would like to become a bigger player within more of the agencies it has already, according to Williams.

‘Proactive’ strategy

Some observers were surprised by the repositioning because the company has been highly successful. In 2002, premiums grew by 30 percent and, in 2003, by 26 percent. Over the last decade, its annual profit has averaged 6.5 percent; in the last five years, 5.8 percent; and in 2003, it reached 12.7 percent.

Financial analysts contacted by Insurance Journal commended the company for not becoming complacent and for being “proactive” in the face of heightened competition and a softening auto insurance market.

Polina Chernyak, analyst with Standard & Poor’s, maintained that the important aspect of this move is that Progressive “wants to demonstrate to its independent agents that it is committed to them and willing to spend the advertising dollars” required to increase their business.

Meyer Shields, an analyst with Legg Mason, applauded the company for recognizing that as good as its results have been, it has to keep changing to continue its growth. “Their results for 2002-2003 were so outstanding that they would be difficult to duplicate,” Shields commented. Shields agreed with Chernyak that Progressive executives are looking ahead to when competition is bound to get tougher.

Both analysts said they would be watching for the next six months to a year expecting to see a boost in independent agency business at Progressive before further judging the strategy.

Branding solution

From a branding perspective, the move appears smart, according to Peter van Aartrijk, managing director of The van Aartrijk Group LLC, based in Springfield, Va., and an expert on insurance branding. Van Aartrijk said the move makes sense for a company with dual marketing channels. “This is a case of multi-distribution dilemma—what do you do? Keep Progressive as a single brand and have two distribution channels? Launch a new company without any ties to Progressive? Or launch a new company that leverages the master brand, which is Progressive? They chose option three, which is the right course.”

The switch will take time and money but it is better in the long run than continuing with the distribution conflict, he said.

Van Aartrijk also likes the chosen name Drive. “It says ‘action.’ It’s pretty cool, actually—matching the company’s personality … And it sure is clear. It should put to bed speculation about whether Progressive wants to be in home insurance.” (Van Aartrijk is right. Williams confirmed that the company has no interest in the homeowners insurance market.)

In addition to elevating the agency segment, the move strengthens Progressive’s attack against its captive competitors Allstate, AIG Direct and Geico, according to van Aartrijk. “That’s a huge plus,” he commented.

Al O’Reilly, an independent agent in Chicago, Ill., noted that Progressive is still sometimes viewed as a nonstandard carrier (which is how the company started) and that the new brand might change those perceptions. (Disclosure: O’Reilly is the father of IJ Midwest Managing Editor Kevin O’Reilly.) “They said at our meeting they’re going to spend tens of millions to brand Drive. The Big I’s Trusted Choice has $3 million in their budget. So, that sounds good to me.” But, O’Reilly added later, “Can an agent live on 9 percent [commission]? I haven’t figured out how yet.”

For the complete Insurance Journal audio interview with Bob Williams, agency president for Progressive, visit www.insurancejournal.com.