Progressive Weighs Rebranding for Independent Agency Force

Mayfield Village, Ohio-based leading vehicle insurer Progressive Corp. has called its top-selling independent agents to a meeting in Las Vegas this week to unveil what is described by a company spokeswoman as an “overall brand communication strategy” purportedly aimed at helping the firm’s independent force sell more.

Rumors have swirled about the company’s plans as leading agents were contacted by field representatives about the meeting, to be followed up by a required meeting held in each region for all producers in September and October. Mum’s the word about the company’s plans, as a number of people contacted by Insurance Journal refused to speak about the new initiative, referring reporters’ inquiries to the public relations office.

“It’s a little vague to everybody right now,” said Donna Pile, the owner of Lexington, Ky.-based A.G. Perry Insurance and a Progressive independent agent. “Whatever it’s going to be, apparently it’s big. But I have no clue where to point the arrow.”

Progressive has a combined distribution model, accepting business both directly online and by telephone but also offering prospects the opportunity to work with a local independent agent if they so choose. All of this has been supported by a very aggressive advertising strategy that rivals that of exclusive agent auto insurers such as State Farm, Allstate and Nationwide.

Over the years, many independent agents have grumbled about Progressive’s commitment to the independent agency distribution channel, and now some have speculated on InsuranceJournal.com’s comments pages and elsewhere whether the company is moving to cut independent agents out of the lucrative Progressive brand loop altogether.

It’s of course unclear what the new branding strategy might entail, but if it involves a new brand solely for independent agents — perhaps similar to Allstate’s Encompass Insurance Co. — the implications for the company’s commitment to the independent agency channel via Progressive, specifically, could be unsettling.

“It’s just conjecture,” Pyle said. “The thing I’ve seen happen a lot in the past is that people on the street have a lot of comments to make and it’s just too bad when the news hits the streets and everybody’s wrong. Just to say, ‘Here’s what I think it is’ would just feed the rumor mill.”

Mary Beth McDade, a Progressive spokeswoman, said “the details are still being worked out, but this will help agents sell more business. We’ll be in a better position later this month to share all the details you want, but we haven’t yet, obviously, shared any information with our agents yet.” They will be the first to know, she said.

At a recent meeting of the Independent Insurance Agents and Brokers of New Hampshire (IIABNH), a Progressive executive urged agents to attend the October meeting for “important news.” Michele Streton, product manager in northern New England for Progressive, acknowledged what she termed the “suspense” surrounding the company’s announcement but would not reveal the subject of the upcoming meeting, joking that she’d lose her job if she did.

In her talk before the IIABNH, Streton stressed that “independent agents are critical to Progressive.” She suggested just how important they are by noting that the overall company — direct, online and independent agents sales combined — is now the third largest writer of auto insurance in the country and that its independent agent share ($8 billion in 2003) alone would rank fifth if it were a separate company.

“What’s impressive is that our growth has not been by acquisition,” she said.

She also revealed that Progressive’s loss and combined ratios for business generated by independent agents are almost identical to those for business sold via direct or online methods. The independent agency side of the company does not pay for the extensive consumer advertising the company does or some other fixed costs assumed by the direct sales side, but the agency segment does cover commissions paid to agents.

Streton also acknowledged that agents have questioned Progressive’s commitment to the independent agency channel. As proof that the company is committed to agents, she announced that Progressive would begin selling commercial auto in New Hampshire starting October 20, a move agents have requested.

“We’ve done consulting with agents to get their feedback,” McDade, the spokeswoman, said. “We don’t’ want to start responding to every rumor out there. We don’t want to go down that road. It will be very exciting news.”

Repurchasing plan

The move will come quickly on the heels of an announcement that Progressive is repurchasing 17.1 million common stock shares through a Dutch auction, the method used by Google Inc. during its initial public offering. According to A.M. Best Co. property/casualty ratings analyst Kenneth Tappan, the repurchasing plan is meant to lower the company’s premium written to surplus ration from 3.0 to 1.0 by the end of the year.

For 2003, Progressive averaged a 2.6 to 1 ratio, versus the private passenger auto insurance industry’s 1.6 to 1. So 3.0 is “somewhat on the higher side,” Tappan said, but the insurance ratings standard-bearer is not concerned and has not altered Progressive’s ratings because it believes Progressive has strong earnings and resources to replenish the funds used for the repurchase. Progressive has been very profitable, with a five-year pre-tax return of 29 percent.