Innovation At Progressive A Pay As You Go Insurance Case Solution

2. Porter Analysis

i. Bargaining Power of Buyers- Low

The bargaining power of the buyers is low in the industry as there are a handful of well-known insurance companies in the industry, which leaves the buyers with limited options to choose from as they need to select the insurer with the highest degree of credibility so that they are able to get their claims in case of any accident or damage to their asset. Hence, this allows the insurers to charge higher margins.

ii. Bargaining Power of Suppliers

The bargaining power of suppliers in the industry is low as there are a large number of suppliers. However, this would mean that an insurance underwriter in a small company may get attracted to a larger company as he would get better pay and growth prospects hence, this can be a threat for the players operating in the industry.  

iii. Internal Rivalry

The level of internal rivalry is high as there are a large number of insurance firms operating in the US market as they cater to the different customer segments. There are top ten players that dominate the industry and have a strong reputation in the market. Companies with a low-cost structure, higher efficiency, and improved customer service are able to get a larger market share and attract a larger pool of customers. However, as it is known that there are large ten firms in the industry, there is a possibility that the industry will shift towards consolidation as the smaller firms will be bought by the larger firms.

iv. Threat of Substitutes

The threat of substitutes is low in the industry as most of insurance companies offer a similar range of services. There are products tailored to the different needs of the customers which is why many companies cater to the niche market segments in order to improve their margins. 

v. Threat of New Entrants

The threat of new entrants in the industry is high due to low capital requirements. Also, many banks and other financial institutions may also start offering insurance products which would further intensify the extent of competition in the market. Hence, this is the reason why there are thousands of insurance offering bodies in the United States which makes the industry highly competitive and attractive for the new entrants.  

3. VRIO Analysis