CEO Peter Lewis knew from the time of its inception that the Immediate Response service would make his company faster than the competition. It took a while for him to realize, however, that being faster than your rivals can also make you more profitable. Here's why.
Rule 1: Speed saves money.
At Progressive, claims reps perform their inspections right after an accident, instead of waiting several days to visit customers. Eliminating delays generates substantial cost savings. Vehicles that get inspected sooner get repaired sooner — which means that Progressive pays fewer storage-lot and rental-car fees. And by enabling reps to focus on the real work of inspecting accidents — instead of sitting behind a desk juggling paperwork and fielding customer complaints about delays — Progressive hires fewer reps than it would otherwise.
Rule 2: Speed helps customer morale.
The sooner a Progressive rep meets with an injured party, the more likely that party is to negotiate a settlement. "You're already mad because someone hit you," says Lewis. "If your insurance company moves slowly, you get furious. You're probably going to run out and get a lawyer. Then the process could take months or years — and cost everyone more money."
Rule 3: Speed improves accuracy.
Claims reps who see vehicles immediately can assess the damage firsthand. Which means that Progressive is less likely to be victimized by a body shop trying to pad its bill, or by a customer trying to fake an injury. "As much as 30% of the money that auto insurers pay out is for fraud," says claims-process leader Willy Graves.
Rule 4: Speed lowers prices.
If a company spends less money settling claims, it can charge lower prices for its premiums. That's a huge benefit for a company that has built its business around insuring risky drivers, who are charged more for coverage. The faster Progressive has become, argues Lewis, the more price-competitive it has become. "Fast is cheap," he says.
Rule 5: Speed sells.
The company's track record of fast, on-site service has become its best marketing tool. The distinctive Immediate Response Vehicles (IRVs) turn heads — whether they're roving the freeway like a billboard on wheels or parked alongside a wreck for every rubbernecker to see. "In some ways, responding to the scene is our best form of advertising," Graves says. Indeed, he reports, more than a few motorists hit by Progressive drivers have been so impressed by an IRV's prompt arrival that they've inquired about buying a policy themselves.
A version of this article appeared in the November 1998 issue of Fast Company magazine.