Auto Insurance
Making Bad Risks Good Business
Recently, an executive at State Farm said he could not make money selling auto insurance to speeders, hit-and-run drivers, drunken drivers and other menaces.
“We love attitudes like that,” said Bruce Marlow, chief operating officer of the Progressive Corporation. “Prejudices like that allow us to succeed.”
Progressive, the nation’s 38th-largest property and casualty insurer, has earned an enviable living by committing what seems to be heresy: It specializes in covering drivers whose coverage has been rejected or canceled by other insurers.
These pariahs not only include drivers with blemished records but also people rejected as too old or too young, because they own a fast car like a Maserati or Lamborghini or because they do not speak English. In the process, Progressive has become not only one of the largest issuers of “nonstandard” auto policies in the United States but also one of the most profitable auto insurers of any type.
Indeed, most insurers no longer hope to make money on auto insurance. They look to other lines of insurance or to investment income for profit. But since 1980, Progressive has consistently made money from its offbeat auto insurance business, producing an average annual return on investment of 23.6 percent companywide.
Under the 25-year stewardship of Peter B. Lewis, Progressive’s 57-year-old president and chief executive, the company has grown to $1.3 billion in revenues and 6,000 employees from $6 million in revenues and 100 employees.
“Progressive pretty much provides an example of how to run a successful insurance company,” said Richard Haverland, executive vice president of the Great American Holding Corporation, a Cincinnati-based insurance group
More : query.nytimes.com
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