In the ultra competitive business of auto insurance, innovation, marketing and advertising can make or break a company.
That's why Progressive Inc., one of the largest U.S. auto insurers, has unveiled a new feature in Connecticut that gives consumers more control over how much they pay for their coverage.
Known as "Name Your Price," the interactive, online tool gives prospective customers the ability to tell Progressive how much they are willing to spend on auto insurance. Progressive, in turn, either offers coverage that meets that demand or finds a package that is closest to the price.
Dale Willis, Progressive's Name Your Price manager, said the goal of the new tool, which he says is the first of its kind in the United States, is to make the cost of auto insurance more clear to consumers.
"The goal is to make buying auto insurance as easy as possible," Willis said in a recent interview. "The more transparent and easier it is for customers to understand a policy, the better chance they have of becoming a policyholder."
Auto insurance companies spend hundreds of millions of dollars each year on marketing to try to separate themselves from the competition, which is robust especially in the state of Connecticut.
As of September 2008, there were 302 automobile underwriters for commercial and personal lines of insurance in the state, up from over 200 who wrote coverage in 2004, according to the Property Casualty Insurers Association of America.
Meanwhile, as the recession lingers and more jobs are lost, the Insurance Research Council estimates that nearly one in every six drivers will drop their car insurance by 2010. That means the race to renew customer policies or get new ones is as competitive as ever.
According to TNS Media Intelligence, an industry tracker, overall ad spending by auto insurers between 2003 and 2007 nearly tripled on an annual basis to $1.7 billion.
Meanwhile, Mintel Comperemedia says that auto insurers sent out nearly 3 billion direct mail offers to potential customers from the second quarter of 2008 to the first quarter of 2009.
Willis said Progressive's new service is another "unique message that could help the company break through the clutter."
"Results have been significantly successful," Willis said.
Here's how Name Your Price actually works.
After a prospective policyholder enters information about themselves and their vehicle, they input a price of how much they are willing to pay for insurance. Progressive will then display the closest available package of coverages, limits, and deductibles that they offer based on the price the customer has entered.
The prospective policyholder can then drag a "slider" bar to the right or left to see how their coverage and price can change. If a customer drags the bar to the right, their rate will increase as their coverage changes either with higher limits or lower deductibles.
If the bar is drifted to the left the rate will decrease and coverage limits will be lowered and higher deductibles will occur.
Willis said the program may also get customers to spend more on their insurance, rather than less, because they will be able to see with the slider bar that spending a few extra dollars can provide them better coverage.
Progressive started Name Your Price in 2008 as part of a pilot program and now offers it in 30 states including Connecticut.
Willis said the company feels very confident about the service and will begin a national advertising campaign about it in the coming months.
Progressive also recently unveiled another program known as MyRate, which is a behavior-based car insurance program that bases rates on how people drive.
Under the program, drivers receive a device that plugs into a port in their car and measures how, how much and when the car is being driven. Cars driven less often, in less risky ways and at less risky times of day could receive a lower premium.
Greg Bordonaro is a Hartford Business Journal staff writer.