Progressive Corp. will look to the small-fleet market as it seeks to expand its commercial lines auto insurance business, executives said during the company's second-quarter investor event Aug. 8.
Karen Bailo, senior controller for commercial lines, said coverage for small fleets — those with between six and 30 vehicles — is a $4 billion market in which the company has "low penetration" and has "only started to put energy into."
Progressive has done well in the six- to nine-vehicle fleet segment, President and CEO Tricia Griffith said, but not as well with fleets of 10 to 30 vehicles. Bailo noted that the latter is "an environment where pricing is driven more by qualitative assessments of an underlying basis," rather than by the "objective and verifiable data" it uses in other auto lines.
As a result, it revamped its approach for that line of business, including by using new data sources, she said. The new enhancements were tested in Texas and are now poised to be rolled out nationwide, with Progressive expecting the model to be in place in states representing over 80% of premium by year-end.
As in personal lines and truck segments, driver usage technology, or telematics, is expected to play a significant role in the small fleet expansion, Bailo said. Progressive will benefit from the added segmentation of the customer base that telematics allows, while customers will benefit from discounts and better rates as well as savings through the ability to monitor drivers' behaviors.
About a fifth of the 10- to 30-vehicle fleet market already buys such services on a stand-alone basis, she noted, adding, "Penetration is low, creating this market opportunity. And we also believe through the indemnity savings and the retention benefits we can essentially deliver these services free of charge."