Progressive Makes Big Claims

Back in her Immediate Response Vehicle (IRV) Botello works up an estimate. She opens Claims Workbench and downloads a file from the corporate mainframe. Then she launches Pathways, an application that provides an encyclopedic listing of parts for nearly every car on the road. (Reps used to rely on several boxes of "crash guides" to do their estimating, but the voluminous books weren't always up to date.) Botello scrolls through a database that lists parts, prices, and labor-hour estimates. The rear door? Replace. The bumper? Repair. The driver's door? Well, that presents a problem. Botello can't find a shop that has the parts she needs at the price she wants, so she radios a rep familiar with the neighborhood and finds parts "of like kind and quality" at a nearby shop.

Claims are assigned according to their complexity. Newer reps handle single-car accidents and fender benders; more experienced reps get multi-car accidents, which often involve totaled vehicles and injuries. A two-car accident might involve damage to both cars and one injured motorist -- for three total "features." One rep "owns" the claim, and other team members assist with various features. That arrangement is more efficient than having one rep do everything. At Progressive's Greenway office, in Houston, where Botello works, each team has "five in and five out," says Nik Cheairs, 37, weekend claims manager. In other words, five team members work in the office, answering phones, dispatching agents, and resolving long-term claims, while five claims reps work the field, doing Immediate Response.

Progressive offices are sprouting up all over Houston, including seven in the past 10 years. "As we grow, we get closer to our customers, and our service gets better," says Mark Oppenheim, 41, regional manager for east Texas. There's a learning curve associated with doing business with Progressive. For Immediate Response to make a difference, customers have to do their part: The sooner they report an accident, the sooner the company can respond. In Houston, people are catching on. Maybe it's the barrage of TV and radio ads about how Progressive does business. Maybe it's the nearly three dozen IRVs that roam the city -- offering daily evidence of Progressive at work. But these days, in Houston, more than half of Progressive's loss calls are placed within 24 hours of the accident.

That kind of collaboration changes the economics of customer service. (See "Speed Rules".) It also changes the emotions of customer service, turning an inherently unpleasant, inconvenient, and even traumatic experience -- a car accident -- into something not so harrowing. "You'd be surprised how many people are nice to me after they've just had a wreck," says Botello. "They're happy to see me, because I'm there to help. And if they've never experienced Immediate Response before, they're surprised that I'm there at all. Some even apologize for taking up my time. I have to tell them, 'I'm supposed to be here. This is my job.' "

Big Claims, Clear Metrics

There's no doubt that unconventional services like Immediate Response and powerful tools like Claims Workbench have created an advantage for Progressive. But Peter Lewis traces his company's ascent to something simpler -- two no-nonsense operating principles: "hire the best" and "pay the most."

As far as Lewis is concerned, around-the-clock service and cutting-edge software aren't worth a thing without topflight talent. "We have the best people in the industry as measured by education, intelligence, initiative, work ethic, and work record," he asserts. "We find them and go after them. Then we put them through our crucible. This is a highly competitive, challenging place to work. We work harder than most companies, and that becomes sort of seductive. Many people wash out. The ones who remain are fantastic."

Lewis is something of a fanatic about creating clear, measurable objectives that employees understand and agree to meet. Those who fall short don't last long. "The other side of hiring good people is firing people who aren't good," he says. "We evaluate people against their objectives, which they negotiate with the company and then put in writing. If people aren't doing their job, it's good-bye. This is not a bloodthirsty place. It is a humane environment. But we do not suffer nonperformance."

Progressive maintains what its CEO calls "an aristocracy of performers." Those who perform well get paid well. And Lewis knows how well people perform, because Progressive tracks virtually every aspect of its business. "If you want to improve something, start measuring it," Lewis says. "Then attach rewards to positive measurements, or penalties to negative ones, and you'll get results."

Once Immediate Response got off the ground, for example, Glenn Renwick, 43, a technology-process leader, became eager for customers to report losses sooner. So he created a sophisticated metric called the Claims Reporting Index (CRI), a logarithmic scale that monitors how long it takes customers to report accidents.