For instance, Renwick said, he would rather have a customer pay $7 a policy for 20 months than pay $10 a policy for 10 months.
"We're looking at long-term cash flows that yield more" and "focusing on price point at expiration to provide customers with a product at a price that we would be comfortable with," Renwick said during a third-quarter conference call on Friday. "We have not used the pricing lever as much as we plan to use it going forward."
Growth in the auto-insurance industry has traditionally come from raising premiums rather than increasing the number of customers. That dynamic has changed, as consumers can do more research on the Internet and are better educated about their options because of increasing levels of advertising in the category, including that from value-positioned brands such as Geico.
While Progressive is seeing more quotes generated electronically from sites that allow consumers to quickly compare and contrast insurance offerings, conversion rates are down.
"Consumers are shopping around more. They're less loyal," Renwick said. As a result, he said, Progressive has directed some recent advertising activity to be more phone-centric--and while he refused to disclose actual results, he said the growing use of Internet shopping or electronic agents "plays to our strengths in both of those channels."
Progressive will also seek opportunities to "take rates down," perhaps in urban markets where the increased number of policies written offsets the effect of pricing decreases. A new brand campaign is expected to break in the first quarter from Arnold Worldwide, the Boston-based agency Progressive hired last month.
In the first half of 2006, Progressive trailed market leaders in the amount it spent on total U.S. measured media. Progressive spent $123.7 million versus $223.9 million for Geico, $184.4 million by Allstate, and $150.1 million by State Farm, according to TNS Media Intelligence.
Progressive also said it would partner with Homesite Insurance Corp. and Liberty Mutual to provide home insurance to auto insurance customers. The home insurance product will roll out first in mid-January in just three pilot states: Ohio, Pennsylvania and Oregon. Progressive will earn a commission on policies sold directly to consumers, while its agents would receive the commission if sold to consumers through that channel.