Insurance Distribution Disruption: Customer Ownership Drives Progressive’s Bolt Platform Selection

As insurance products become ever more commoditized, brand equity and customer ownership are more important than whether a given insurance company underwrites the products it sells.

(Image from Progressive’s Home Advantage program site.)

Progressive Insurance has selected the Bolt Platform, touting improved customer experience. The efficiencies of the platform, offered by BOLT Solutions, Inc. , will enable Progressive to substantially reduce quote time through eliminating duplicate entry, according the insurer. More significant than these capabilities themselves is the improvement they bring in enabling Progressive to retain ownership of its customers by offering them the choice of products underwritten by other carriers.

Bolt will be used for the Progressive Home Advantage program, which was devised to meet the needs of shoppers who prefer to bundle their home and auto coverages, according to Carolyn Wald, product manager, Progressive. The insurer’s success so far in meeting those needs can be gauged by its appearance within the top ten in J.D. Power’s Homeowners Insurance Customer Satisfaction Index Ranking within the researcher’s 2013 U.S. Household Insurance and Bundling Study.

Carolyn Wald, Progressive.

Carolyn Wald, Progressive.

That’s a significant achievement because when it comes to homeowners insurance, Progressive is a distributor, not a manufacturer of insurance product. In its stated objective of “making our auto customers feel more at home,” Progressive Home Advantage offers home insurance, condo insurance and renters insurance to new and existing Progressive customers with products “provided and serviced by select homeowners insurance companies.”

By bundling other carriers’ homeowners products with its own auto insurance Progressive increases its chance of retaining customers – and avoiding the costs of customer re-acquisition. In a business such as personal lines insurance, where products are commoditized, the manufacturer of the product matters less. And as a household-name insurance company that is among the highest advertising spenders in the industry – SNL reported that Progressive spent $536 million or 3.9 percent of premiums in 2011 – Progressive’s brand serves for its activities as both underwriter and distributor.

The “coopetition” strategy of an insurer selling another carrier’s product is not new, but it is likely to increase, suggests Mike Fitzgerald, an analyst with Celent. “What is at play here is a dynamic seen in other industries as technologies are applied to traditional business,” he says. “The application of new technologies increases transparency and decreases switching costs. Leverage transfers to the customer and away from closed distribution systems.”

Mike Fitzgerald, Celent.

Mike Fitzgerald, Celent.

The Bolt Platform is an example of the way technology is driving disruption in insurance distribution. The platform is currently used by the State of Florida’s Citizens Property Insurance to direct policyholders to private insurer options to reduce the state-run company’s financial burden. Florida’s problem was that as many as half of its policies were not effectively shopped in the private market before the risks were taken on by Citizens. While Florida is trying to lose customers, the Bolt Platform also works for carriers trying to retain customers by ensuring that they can find the products they want without having to look elsewhere.

As an example of how BOLT Solutions has invested in its distribution connections, late last year the company acquired Superior Access Insurance Services (SAIS), an Austin, Texas-based online insurance aggregator that offers over 95 products from over 50 major insurers through a distribution channel of more than 2100 agents.

In the wake of its Bolt Platform selection, Progressive will continue to work with the same carriers for Progressive Home Advantage and will not add any additional ones, according to Carolyn Wald. She emphasizes Bolt’s efficiency benefits:

“The Bolt Platform will improve the customer experience by substantially reducing quote time through elimination of duplicate entry and the addition of data fill,” Wald comments. “This system enhances our ability to focus on the customer experience versus populating manual systems.”

Progressive’s selection of the Bolt Platform is noteworthy at a minimum because the insurer has historically been hesitant to use packaged solutions, according to Chad Hersh, principal, Novarica. “We have long said that even the large, high-volume insurers would eventually migrate to packaged offerings, and this appears to be another step in this direction,” he says.

Progressive’s selection is even more noteworthy as an example of how carriers can respond to the increasing commoditization of product by offering products they don’t underwrite with the assistance of compelling customer experience, suggests Celent’s Fitzgerald.

“As buyers are able to see across the market in ways previously reserved for distributors, bid out contracts to multiple suppliers in an easy and efficient manner, and compare the results easily, they gain more power over the process,” Fitzgerald says. “In many lines of business, the insurance process and product will continue to be commoditized by technology, and the value of an insurance agent will be more about added services, not transaction expertise.”

Anthony R. O’Donnell // Anthony O'Donnell is Executive Editor of Insurance Innovation Reporter. For nearly two decades, he has been an observer and commentator on the use of information technology in the insurance industry, following industry trends and writing about the use of IT across all sectors of the insurance industry. He can be reached at [email protected] or (503) 936-2803.

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