Strong profitability in Progressive Corp.'s direct auto business during the second quarter led the company to further step up its advertising efforts, according to President and CEO Tricia Griffith.
The move follows a decision earlier this year by Progressive to effectively reverse what had been a pullback in advertising spend during the second half of 2016 as it sought to meet internal profitability targets in the direct-to-consumer channel.
Writing in a quarterly letter to shareholders attached by exhibit to the company's 10-Q filed Aug. 2, Griffith said she has been pleased by the results from advertisements that focus on Progressive's homeowners insurance business, auto and home product bundles, and new HomeQuote Explorer initiative. The company recently announced the formal launch of HomeQuote Explorer, a new online quoting platform, in 47 states.
Progressive reported $756.2 million in total advertising costs in its 10-K for 2016, up from $748.3 million in 2015. The company did not disclose advertising costs for the first half of 2017 in the 10-Q.
The company said higher advertising spending contributed to growth in new auto insurance applications during the quarter. The growth rate in new applications in the direct business was 8% for the second quarter and 3% for the first half of 2017. In the agency business, where Progressive said it is continuing to benefit from "many of our competitors taking higher rate increases than we have," the rates of new application growth were 17% for the quarter and 16% for the first half of the year.
Progressive reported a 4% year-over-year reduction in new applications in its commercial lines segment during the second quarter, but the company pointed out that the decline compared favorably with the first quarter. For the first half of the year, new commercial lines applications fell 12%.
Griffith also discussed progress made by Progressive in its Snapshot usage-based insurance program, particularly through a mobile app. She said 38% of new customers in the direct channel are enrolling in Snapshot in markets where the mobile app is available as compared with an adoption rate of 34% in other states. The app is available to direct auto shoppers in 26 states, she said, and the company expects to complete a nationwide rollout by year's end.