Q2 2020 Progressive Corp Earnings Call
[music].
Welcome to the Progressive Corporation second quarter Investor about the company will not make detailed comments related to quarterly results. In addition to those provided in its quarterly report on form 10-Q, and the letter to shareholders, which had been posted to the company's website and we will use this about to respond to questions acting as moderator for the event will be progressive.
Director of Investor Relations, Doug Constantine at this time I will tell me about over to Mr. Constantine.
Thank you Jason a good morning, although our quarterly Investor Relations events. Typically include the presentation on a specific portion of our business. We will instead use all the 60 minutes scheduled for today's event for question answer session with members ever leadership team.
Questions can only be asked by telephone dialing participants the dialing instructions may be found at investors that progressive Dot Com Ford flashy about.
As always discussions in this event may include forward looking statements. These statements are based on management's current expectations and are subject to many risks and uncertainties that could cause actual events or results to differ materially from those disgust during today's event.
Additional information concerning those risks and uncertainties is available in our 2019 annual report on form 10-K, and our first and second quarters quarterly report on form 10-Q, or where you will find discussions of the risk factors affecting our business.
Harbor statements related to forward looking statements and other discussions challenges we face.
Ocular note that our quarterly report on form 10-Q for the first quarter includes discussions of the risks and uncertainties that we face including specific risk factors arising directly and indirectly from the cold in 19 pandemic and these risks are further referenced in our second quarter 10-Q.
We're going to our first question from the conference call line, our CEO Tricia Griffith will make some introductory comment tricia.
Thanks, Todd I really wanted to actually introduce you to everyone. I know this is your first IR call. It isn't a weird circumstance due to cold bid.
But I thought I know you've talked a couple of people over the last month or so what I really enjoyed working with you maybe history in this role being really additive for the personnel as well progressive as you all know jail cardiac took her colleagues to think Ti for progressive home.
Patrick Bryden wasn't prior director of Investor Relations Who's now, our treasurer and not Downey is our HR controller. So we pride ourselves on movement around the company. We think this is such a good role for dog.
At this time in his career really helps both on analyst investors progressive in individual for Doug you talk little bit about your career sure I've had the opportunity to work throughout the organization my ears at Progressive spent five years and commercialize run manage five different states that included a sense on steering team a part two of our truck Indiana.
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Good opportunity to work in National accounts, where work is one of our largest agency relationships and most recently I've been a progressive personal lines.
And that is two different states.
Really looking forward to Ah Ah working with many of you on this call and I'll do my best to feel the huge shoes that.
Great I think said, we're thrilled to be working with you and of course, we do Miss Julia but that was I'd have you here, Jason we're ready to take the first question.
Certainly it should be I did to the Q question could you. Please press star one on your telephone in order to get as many questions as possible. Please limit yourself to one question and one follow up.
Your first question comes from the one of only screens spend from Wells Fargo. Your line is open.
Hi, Thank you. Good morning, My first question I was hoping to get.
A little bit of color.
The frequency and also severity trending in July.
China in quarter.
We're pretty favorable and [laughter] no no individual start going back to work in perhaps on you know we feel a rise in miles driven just huge at folks striving for summer vacations et cetera, just wondering if necessary.
No how the trend.
Yeah.
Stabilized.
You know direction towards pretty cold.
Thanks to lease good morning, I won't talk about July, but I will talk about when we think about frequency Allstate. The June was lower than the full quarter at about 24%. So we are seeing them stabilize we still it's very different depending on the state as well if you can see vehicle miles traveled go.
And then immediately if things close down they go back and forth. So we form is it sort of a macroeconomic dashboard. We have when we have a lot of data to look at that and we react to that and of course I'll go I'll go into severity because the calendar period severity is very distorted by the drop in new features so on the mix difference compared to last year.
Here is is very distorted as you see on a likely with lot of our competitors I think I talked about this last quarter with PD and remember we report incurred versus paid on and I sense of our competitors report paid as well as PCIA Hot same story on T.D. incurred its the the supplement stroke.
PT up about nine points. So when you look at those payments from prior quarters that were working supplements on that frequency on other supplements are in the in the numerator and so those dollars are increased where the incurred accounts or the denominator and so that's where you'll see the difference.
Same thing with B. I its age in place a incurred severity about nine points. This quarter average age of I'd be eyes are up about 7% a little bit higher. So we look at the actually near trends being about 6% to 7% Pip incurred is really reopens on supplements from pets it accounts for.
About 25 points of frequency from again from prior periods when frequency was normal now that the oddest won in this quarter is really our collision incurred trend and that is a on the severity is negative on that mainly because when you look in quarter 220 over quarter attune.
19 of the frequency is down about 36% and then as we thought about our plan because he had excess capacity in claims we redeployed. Many different claims individuals I think I talked last quarter about giving Ohio hundred members of our claims organization to adjudicate.
Unemployment claims we've also deployed claims people in our CRM organization as people are trying to kind of get their arms around their bills. We also redeployed about 100 people humor subjugation unit, which means that money is coming and we have you know kind of full court press on collecting money when we have.
Liability dispute split with our competition, it's about money has come in this quarter, because we have 100 extra people actually doing not so that I'm really the how the severity trends have gone negative this quarter. So I'm frequency in June we saw debate a little bit to 24%, we'll watch it closely as things going well.
Just react accordingly thankfully.
Okay. That's helpful. And then my second question on no. It seems like players and they said you know.
Kind of responded differently in terms the weight changes right I mean, we feed wheat slowing, but obviously no. There's a degree of magnitude between the different players you know you seeing.
Instead, breathtaking and obviously part of that.
Part of that is impacted by by the rebates, which also depends upon the no different company, but are you seeing on you know the rating environment starting to have an impact.
On your new business trend seems like.
New business trends on starting to rise.
In the second quarter kinda from some of the Cobot Bose.
No kind of that we saw the started the quarters I'm just wondering if the rating environment, having an impact over just more check books, there could be more shopping going on that.
Yeah, we were seeing you know more shopping I think specifically in the direct part of our business and you know how we look at raid see when we took the when we had the credits a billion dollar credits in April and May that was sort of a hey, you know where does this thing happened very quickly could happen very quickly we wanted to react and now we're in the mode really.
You know we're back to grow as fast as we can add or target profit margin, but we're really trying to leverage what we believe we haven't that's industry, leading segmentation. So we're looking across the country each product manager a state by state channel by channel product by product and being much more surgical when we're thinking about our rate.
Right. So as an example, and a quarter two we lowered rates in states that made up about half of our auto premium and if you want to go Oh from the beginning of coded take April through August.
Rates that are that are in play a will reduce will have reduced rates in 35 states that make up more than three quarters of our auto premium that 35 state that doesn't mean, it's 35 revisions it could be a few more because maybe we take smaller bites of the Apple I always think about when he about segmentation and especially increasing rates and lessen some people.
We need to react very quickly I think about my predecessor, Glenn run rate co always said.
Three ones is better than one three and so we're very very surgically looking at each state and trying to determine the best rates to continue our growth and make sure that we know we also have our target profit margin that help lease.
Yeah that is helpful.
Thank you for the color.
Your next question comes from the line of Mike Zaremski from Credit Suisse. Your line is open.
Hi, Good morning. Thanks, maybe first that's for sure you did mention Michigan Auto reform in your life.
Maybe you can kind of give us an early preview of kind of how you she.
It is playing out the Directionally do you expect pricing to fall out or our direct writers like progressive maybe in a better position versus the agency writer.
That's correct.
Good.
Target customers.
It's pretty discounts just curious how we should think about that.
The needle, it's very comfortable for progressive.
I think some idea why can say as we know it was pure herculean efforts to get ready for that events and we were ready I will tell you on this of course. This is really early 'cause. It went into effect July 2nd I can tell you that we are very pleased with the results in terms of growth.
Again, we're gonna have to watch that closely because you did individuals are gonna shoes on to have a pip as it was before and not so it's it's a little bit early to tell anything we'll have a lot more data next quarter why can save from just looking at the early results from a growth perspective, we are pleased.
Yes.
No.
Moving maybe.
The telematics, we're hearing industry participants talked about an increase of the take up rate those industry.
Participants are typically on the agency side.
Have you seen any increasing I've taken in either direct or or thanks for your pure telmex programs.
Yeah, Mike we have we seen it actually I'm more on the agency side or direct side went up a couple points on but leveled out and of course, we already have a high percentage of take rate on our direct side and direct side and our agency side, yes. It did tick up and I think that makes a lot of sense. Because this is a great time to understand you know you are your rating.
Okay, and equals one and it's up about about 12% on the agency side. So overall about 40% on the direct side about 12% agency side, and so little bit more than 20% overall.
But we are you'd be our in our commercial business as well and take rate. There is very strong works and great trends.
Around our for higher segments in terms of their take rate in the room renewal rate as well. So we are no among our you'd be our deployment and really pleased with what was in March one.
Glenn could you give us kind of it that their recent take up rate like crusher gave us on personal <unk> commercial.
We have not provided our pre agreed on smart hall, and our commercial business.
But I would just color, it's it's a exceeded our expectations out of the gate and the other thing or mentioned is that these truckers are required to have the recording devices in their vehicles.
By Federal law. So we don't have the barrier getting a device into the car or giving an app downloaded we get the information directly from third party providers. All goes devices in the trucks. So it is a pretty good proposition to or truck or who can get a significant discount on a premium which is.
Pretty significant premium so.
I got an hour.
Point to those items without going into a number in saying, we're pretty pleased okay, great Yeah I.
I think John be a few quarters ago talked about or maybe as Karen talked about insurance being like a top you know why the top three costs for those truckers I think that that is really important than we've seen you know trucking, increasing and based on call, but I will also add.
John talked about Smart Hall, we also have snapshot preview, which is available for our business auto and contractors and although we don't have the data. It gives a same upfront savings and fleet management, but we are encouraging we're encouraged I should say with the demand and we think that will only increase and we have on that.
In about 40 states and our agency channels so far.
Your next question comes from a line of David Mobile going from Evercore ISI. Your line is open.
Hi, good morning.
Just a question on just the bundled business the Robinson and the 10-Q it sounds like you had some pretty good growth.
In the Robbins, and particularly in the direct channel, but it also looks like you had some good growth in and in the agency channel just just wondering where we're at in terms of the mix what percentage of your book is now.
Bundled policies.
And where do you expect that to get too.
Yeah. So we're happy with our Robbins and grow the agency channels up a little bit over 18% in the direct channels up about 46% I think our mix theres right around 10, maybe a little bit lower you know our goal is to continue to have more bundled customers and and so.
The goal is to have you know as many as we can we want every auto customer.
And our book to be able to bundle when they have either a rental or a home should that be other demographic. So yeah. We continue to push harder you can obviously season or advertisement that we talk about protection at home. So our goal is continue to odd to increase our numbers of Robinson, because we know there stickier and and give them or your reasons to stay base.
On the products and services that were able to provide.
Great Thanks, little bit on that percentage or a little higher indirectly been added a little longer in the direct channel.
But we're really pleased with Robertson girls, he's been able to achieve with.
Progressive home, but that's.
Hardware the direct channel is today, but if you blend them together you can do a number a little below 10%.
Okay, great. Thank you and then just my other question is just.
A higher level question on just in terms, how you guys are thinking about miles driven and accident frequency.
I know, there's a lot of uncertainty, but just wondering what you guys are thinking about will do you think that will ever get back to a level of miles driven and accident frequency that we were at.
The coated.
And I guess, just how are you thinking youre just given whatever environment. You think you think will be in.
Yeah, I'll start David by the caveat being you know, we really don't know because of all the different things that go into it. So schools reopening cases going up cases going down vaccines unemployment work from home all those things. So I'll start with that caveat I will say with our Smart Hall data, we did see signs of.
Congestion kind of flattening.
You know more recently and were start we're starting to sort of look in data with that and so we have some initial trends and again, we're going have to fine tune needs. So these aren't it is aren't perfect for but we're continuing to understand the measures of congestion both on our telematics on the commercial side as well as are you the eye on the auto side. So I'll give you a quick example, and again these are going to.
Change, but this is kind of how we look at it. So we've got you know vehicle miles traveled or are not as up as much as they were this time last year and obviously losses hasn't haven't followed in particular, so we're trying to figure out the delta between those two and what we have seen from a congestion perspective is that that does tell some of the delta so on.
The you'd be I side on the auto side, we believe that.
That.
Congestion.
The gap is about one point during morning Rush hour and about nearly two and a half points on afternoon Rush hour, which would take into account some of the differences and actually miles driven and accidents, because less less accidents happen when there's less congestion again, we're just digging into this as we have more and more and the.
David changes and is very influenced about what states do depending on their riser fallen cases.
You are exactly.
Thanks.
Your next question comes from a line of Meyer Shields from KBW. Your line is open.
Great. Thanks, good morning, because we've talked about.
With responds really quickly to frequency.
And I was wondering whether there.
Great.
The increase with a lot more than ever before.
And from an internal perspective are there.
Consideration that would.
Am I right that you would you based on frequency.
Yes, I was a little bit hard here, if I think what you're asking was.
You know, how we would react to frequency from a rate change perspective.
I think we can be taken we take all the data into account frequency right. Now is just so hard it's always hard to predict but it's even more difficult now with all the different inputs with coated.
Again I'll go back to our stated goal and we're going to try to grow as fast as we can we'll look at all the trends and try to understand surgically by channel by product how to how to continue to put our our pedal on that growth, while making sure. We have our profit target margins, we never want to grow.
No and just and I also had that product come with it. So that's an important part we want to make sure that we have competitive prices in girls. So you know it's the predicting frequency is going to be a real challenge for us on in the near term just because of all the different in consider it in a constant state of flux.
That's helpful. Just wondering whether there is limits to how much embedded frequency change you will include it in a rate filing just because of how rapidly could fluctuate.
I can elaborate a little bit there so.
Following depending upon the size your state is going to look a data sometimes going back a year from going back three years, but you're trying to project the trend going forward, because you're trying to price to a point in the future. So you can look backwards, which we do.
Ultimately what we're trying to do is price forward. So it's it's a little trickier this juncture Julien.
We are now means we're seeing due to covert so it's a great question as to how much of that we actually include on are going forward assumption basis.
Versus exclude because we think it's you know a one off that will not be.
And played down the road so it really depends upon the robustness of the program, we're pricing too and.
Our look forward as to what we think we're going to be experiencing when those premiums are in effect, which can be for the next.
Year to true.
Okay. Thanks.
Question on the homeowners side I know the past you talked about correcting maybe the pricing for non cat weather.
What has been pretty bad this years, when you could tell us internally.
Now that progress has four habits is progressing.
Yeah. I mean, you saw the result, so we're you know we need to I you know make sure that that profit is a big part of what we're thinking about in terms of property and so as you know we have.
Our new product Ford Auto mall that we're rolling out you know the hill and when this happened from a cat perspective has been in a pretty very high what we're concentrating on right. Now is to continue to have segmentation. So we continue to roll our Ford auto product out.
In addition, we're making changes to the product and that includes a minimum deductibles and AC. These on Ruth because that's where we see especially they'll tell where the state you underlying ex cats, we feel better about our movement in property, we feel pretty good about as well as as the growth, but again, we want to make sure that we can.
Tinet rollout our segmentation, we want to continue to roll out.
Minimum deductibles and more importantly, make it easy for people to shop. So we had we have.
Property and 45 states now in 17 of those states you can buy through a tablet or sound. So we're pretty excited about our investments in technology around that John you want anything sure yes.
Unlike the.
Vehicle programs, especially personal auto where we've been getting roots more competitive we're taking rates up in home shoulder segregations really important.
I think we've got about 18 experience with our next generation 4.0 product is fantastic. We're also increasing rates would take them up almost 6% year to date.
You know, we're obviously not hitting our profitability targets.
But also recognize that if you're looking at cat losses.
Oh, no change from the aggregate stop loss agreement, we employed last year, which was especially a cap on loss.
Ratio.
To a retention 375 million.
Hail losses effect.
Non named storm.
And we've yet to get that retention, though so if you adjust.
Assumed that we are under the same.
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Last year you too.
Sure that would be would be below 100.
So well above our target margins nerves or we are.
The actions attrition already and we're also.
Great. Thank you so much yen as 18 states on forward I do I think 16 of them have the mandates that I referred to in terms of men deductibles in HCV. So we feel good about where we're going we need to continue to concentrate on that.
Your next question comes from the line of Greg Peters from Raymond James Your line is open.
Good morning. My first question is around technology I know you guys had been in Bay innovative what technology, but there's also been some new platforms that fit the market like route.
Usage based insurance and lemonade and the renters can you talk about your competitive position relative to some of the startup companies that are gaining a lot of attention the marketplace.
Yeah, I feel like that we're in a really nice competitive position for a couple of reasons and we've had usage based insurance for literally decades, and I've come in different forms and we've continued to evolve as technology has evolved. So we have a lot of data to really understand that variable and we continue to evolve that's the best part isn't it sounds something that we that we said.
Still on so we continue to involved I will say that startups are good competition, because they're doing things that that consumers want we've always believed and the ability to rate a driver on their individual driving behavior and so as I think I think competition that aspect is good I think also where we have the benefit is an acquisition cost you know when you're.
Startup those acquisitions costs are very spends that we have a good base.
I don't customers for renters at home et cetera, and were known brand. So I feel like we're in a great position. We continue to on AD AD technology advances in are you be I don't think you'll see that abated.
Just to add a little bit that yet.
Usage based model today, we predominantly employ applies discounts in the personal space.
Basically the first we know point, we get very participation discount upfront increasingly.
Data upfront and commercialize were always getting that's made up front and that's really the route miles.
Recall that I don't know five years ago. So we rolled out what we called snapshot test drive which was models.
Are you get the driving behavior.
Price the policy.
We are doing that now with third parties that are such as Oems such as other.
Providers and we are now deploying what we called snapshot test which is.
Model, where you download the App, we see you're driving behavior, we reported those discounts.
New business similar to our commercial lines model so.
You will gradually see.
Gration to employing driving data.
Our available fraud.
And you think we're very well positioned for that transition.
On the property side I will point out that we have for a number of years now been the number one provider homeowners close and the number one provider of runners quotes online administration mentioned.
Brand is a big driver.
All the insurance space.
We think it is a key library to have acquisition costs in a place that are feasible to make money or Walter.
My follow up question around your comments on acquisition costs.
I realize you have the snapshot product the dongle, but then there's also a lower cost alternative you know of having the app on the phone.
Can you talk us talk us talk to us about how the mix has shifted within your auto business from heavily snapshot two more blended where we are on that and that cycle and where we're going to get too.
Yeah, I think you know as we introduce the mobile device that has continued to increase I think is easy I think people get it they can see their information more readily we still have a fair amount that were on the snapshot dongle on I think as we continue to look at the model of seeing your information upfront and they were.
Very early on that and we haven't really even advertise that we've seen really high take rates I think people I think a couple of thing one word trusted brand that understand Hebei I too the situation with co. There I think people are going to.
Want to give their data more and more especially if they're not driving and they're working from home are often.
Okay. Thank you for the answers.
Thank you.
Your next question comes from a line of Yaron Kinar from Goldman Sachs. Your line is open.
Thank you good morning.
A couple more questions on telematics.
First yes.
First.
Well.
Thank you please.
Yes.
I think it's almost all right. So I think you are asking about the accuracy of the data from a dongle versus the mobile App your.
Yes, a little bit.
There are differences for sure technology as you can imagine Cadiz involved in the mobile space some pretty quickly.
So.
There are definitely differences, but we're very confident that we can adequately price books based on the mobile data.
Can you know the do is coming directly from vehicles.
Is growing as well and.
You know that's obviously as robust as you can get so we're very comfortable between mobile and gone goal in terms of ability to price accurately and.
What was just discussed it is lower cost option.
Can't afford also continuous monitoring.
If we saw chose to do that as well so.
Little different but not materially so is where I would characterize yeah attribute John I would say when we look at the data we get from the dongle also versus the mobile devices little bit different as well because we're able to understand a handheld versus hand free and not just circuit. In addition to.
The time, a day miles traveled in heartbreaking serasa getting a little bit more data, but there's a little bit of a difference, but nothing that were concerned about.
Got it.
For the completion.
Yes.
Yes.
Despite the eight.
Yes.
Okay.
I think.
Rather than a lot of trouble hearing you are understanding kind it says I want again.
Called I'll try to I'm asking for the customers who sign up for you beat by.
Waiting to you assign the you'll be idea.
In the Grand scheme of pricing those customers sure sure.
Some commentary there it's very powerful rating variable however, today, because not everyone takes this upshot option.
We saw that left in terms of our algorithm. So we saw for other all the other rating variables because.
All the customers will be ready when those ready variables and then we solve secondarily first snapshot.
So even though we will see it being our most powerful rating variable.
One could surmise that if we saw poured first there would be even.
More powerful rating variable, but again, because we don't require everybody to take that option. We saw that lost that answer your question.
It does.
Can you also maybe offer like a doesn't account for like 5%, 50% right.
How important is.
That will vary at the customer level. So.
Where you live.
The other demographics the household.
You know as you can imagine for for.
More preferred households is going to be different going full bore nonstandard households, young old et cetera, and urban and rural.
Well, so we don't provide an absolute percentage for you.
Got it thank you.
Once again, if you like to ask your question. Please press Star then the number one on your telephone keypad. Your next question comes from a line of Brian Meredith from you'd be US Your line is open.
Yes, Thanks, Trish so could you talk a little bit about the competitive landscape right now personal auto it, particularly as it look at your largest competitor on the direct side, they're offering discounts to kind of new and renewal customers. Instead of these credits do you anticipate that having any impact on your also alluded to kind of grow new business.
In the near term.
Yeah, I mean, I think I think everybody took a decision when we went through co brand what to do and no. One company had it perfect because the data was ever changing it was very news. So I feel like you Guy goes a great competitor they took a different stance and we did in terms of taking to the two credits in April and May I.
Feel very comfortable and our ability to continue to grow and especially as the end came to the second quarter. So yeah. We've we've increased our advertising in auto about 12%. This quarter. So that kind of tells you that you know where we're very much in play for any business. We believe we believe times like.
This where there's disruption is really when we win in the marketplace and so where you know although we hate. The fact that this is happening to our country. We believe a lot more people shop in our our goal is to have very competitive rate and great service once once you're with us.
Great and then my second question is with respect to the commercial lines of business continued to have.
You know some adverse reserve development in that area is that related to some of the shared economy freshness and kind of what does your experience on that business has any changes going on.
Well the severity and the development is really.
This is Ben based on similar topics that we talked about before in terms of.
Chris medical costs in the marketplace, the higher attorney Repped on newer features and that our mix of business going too far higher I trucking, which has a higher severity than business auto and and contractors and when you look at the quarter to reserve development and commercial lines about 44 million really came.
From about four states those states being big States.
And so when you look our overall year to date development. Overall, you can see commercial lines is is a big as part of that 116 million at.
98 million. So we continue to watch that from the commercial lines perspective, you know frequency is down as well that we.
It's very much like I've talked about in prior quarters with on specific states and those variables in terms of medical cost attorney, Rob and our mix of business changing.
So it's not specifically related to its not necessarily the.
The rights your type businesses. It it's just generally.
Yeah, I mean, you, Tennessee, we talk about our can see and we took yeah. We you know we took our premium down by 29 million to this non so we're we're definitely seeing less driving but in terms of.
The development piece, it really is about higher higher BA limits and our gestures reserve going up as was the gosh you talked about before yes.
Gotcha, Okay. Thank you.
Thanks, Brian.
Your next question comes from a line of Ryan Tunis from Autonomous Research. Your line is open.
Thanks.
I was hoping you could share with such an actual average rate numbers for the quarter and also through the years so far.
Oh I don't have it with me, but it's been it's pretty flat I think our average written premium the rate I mean, a rate of increase.
Correct correct.
Oh.
Between one and 2% minus one little them out as well.
Her personal are yeah personal auto commercial up a little over two and property I mentioned was almost six yeah.
Sorry, perfect. Thanks, and then my follow up is I guess looking through the 10-Q.
Indirect you've got quote.
But conversion rates back.
I'm curious are you guys are interpreting.
You guys are being pool.
Making a reach more competitive how are you interrupt bring your more conversion bridge.
Thanks.
Yeah, I mean, I think that you know when we look at a we also want to add in new apps, our new apps indirect are also.
In conversion, we had some increased AD spend as well I think conversion is down about 2% with quotes sub 6%.
It's the data is ever changing because we do believe more people are shopping, but we like I said, we spent more on in the direct auto and we felt we feel comfortable with our new apps being up at 4% on the direct side and especially.
Increasing towards the latter part of the quarter.
Christian order, we are taking targeted rate decreases so earlier product managers, Joey who are managing.
They or two and they're very focused now where they sit competitive we're watching conversion in their markets and taken targeted.
Cuts largely at this juncture.
Where we think we should be more competitive and have room to take the rate again on a longer term numbers.
And again I'll reiterate for the majority of the state that 35 states, where we're taking targeted rate decreases.
There are small bites of the Apple to kind of see what happened in some states I needed deeper I decreases, but we're really looking out like like John said the averages between one and half to 2% decreases were looking at all the data that could be changing and what we know from the past and what we've always talked about with rate changes overall is.
Our customers want stable rates, and obviously that can't always happen when when you need to get rate like we do in the homeowners product, but that's really our goal here to understand the data as it changes and just be lock step with what's needed to be competitive and grow.
Actually answered.
Again, if you would like to ask your question. Please press Star then the number one on your telephone keypad. Your next question comes from one of Michael Phillips from Morgan Stanley. Your line is open.
Thanks, Hey Church I'm, just curious on your thoughts on given the nickel longer term applications, the pandemic and stay at home online shopping.
Change the mix longer term agency versus direct and maybe I guess, what used to be customers, maybe more willing to become a direct customer.
Yeah, it's hard to say.
Mike I think that you know, we're obviously seeing more now and the recovery is faster in the direct business on both personal auto and commercial auto.
I think about it almost like you know I would have never bought groceries online before because I go to my little suburban town grocery store, where I see my friends and as comfortable well now I'm doing that I see where people you know one because it is a lot of these customers a lot of these agents I should say our spot small businesses and so.
They're reacting to get better sell set up and socially defense and some people might not be as comfortable coming in so I do think it's definitely changing now I think it depends on how long this goes and how comfortably how comfortable people are but it does show I think especially on the commercial side that people are getting and the majority of our business by the.
I've been through the agency channel people are more comfortable buying small business insurance et cetera on the direct side. So we have seen we have seen it change I can't commit that will be a long term change, but I do think it could be one factor and having people be much more comfortable buying insurance across the board and the direct channel.
Okay, and then separately on the bundled product topic.
That's a talked about a lot like many companies can you say if you've been approached more body like other other insurance companies.
Airline companies have you been of course more today than in the past two to partner with them to offer all.
They don't.
Yeah, I think we're probably were pushed a lot in terms of that and on our inner on home quote explore and our business quotas floor, we work with.
A lot of different companies on affiliated partnerships to sell it to sell our home add to our auto customers through you're not just progressive home, but many different carriers and the same thing on on the on their commercial side. So you know, we obviously want it we want to care about the values of those companies a branded those companies to make sure when we.
Partner that we feel good about it when we always want to expand those if we think it'd be better for our customers.
To be able to bundle their auto even if it auto and home even if it's not with us so yes.
There were approached I'm very regularly.
Okay. Thanks.
Again, if you would like to ask your question. Please press Star then one number one on your telephone keypad. Your next question comes from a line of your on Konare from Goldman Sachs. Your line is open.
Thank you.
One follow up I Hope you can hear me better.
I think in the June results they were positively surprised by the renewal auto application and lower policy cancellation.
Can you maybe well yes.
A month of hindsight can you maybe talk about quite what happened there what was what the supply.
Well you know we're happy that were third hadn't changed I think obviously during during the covered period through May 15 for the most part there were moratoriums on any cancellations and we had leniency going into play and.
So we knew at some point our customers on about the commercial side any auto side would either have a big bill coming due or need our help to really kind of get through what could be a big comp and kind of get on course for their future payments for for auto. So we had a process a really very odd.
Detailed process in both our CRM organization on the commercial side in the auto side to personalize those things, what our customers called and knowing that they would have well, we called kind of big bills coming up and how we could help them to get through that payment plans forgiveness et cetera, and 'em, we were really happy to say that through that plan at least.
Started in May 15th and has wrapped up a more recently on the private passenger auto side, we were able to salvage over 50% of those people that might have cancelled and maybe they would have cancelled because because of her shopping anyway, maybe they would have cancelled because of.
Finance is related to Covance, but we were just happy that we were able to personalize that process and have the dilutive.
As individuals maintained their coverage with progressive.
Thank you.
Jason Your next question comes from a line of Mike Zaremski from Credit Suisse. Your line is open.
Hey, Thanks, you hear me yes.
Okay, Great I, just a follow up question.
You know kind of along lines of thinking starting to think about whether there's any kind of secular trends post cobot anything you guys are seeing.
On the official Easter or whatever.
He or expense ratio directly that you think might be done differently, maybe consumer preference to that could lead to some kind of benefits for.
Progressive or just broadly the industry.
Okay.
Well I think of efficiency out an actually go to claim is which as you know are the big organization, that's really our product once that happens and you know it can be he got a balance that with accuracy. So we've been testing photo estimates and video estimates from our customers for quite a quite a long time and you this real.
Early this fast forwarded it because we weren't going to body shops, and so we have a much larger amount much larger percentage of our auto claims going through what I would call photo method of inspection.
Some of it is from our customers, giving it themselves and they may or may not get it repaired I would say that's about 25% and after call that post call that it's been about 55% I'm coming from our network body shops, and so of course, you want to balance that efficiency of reps not having the windshield time are going out with.
Accuracy.
And so as we're starting to kinda.
Come through the first wave of this being a we are seeing some accuracy trends on that we want to be able to have our people eventually side of car. So although it's not as efficient because they're going out we think it's more accurate. So as an example, I recently.
We hear a lot of our managed repair reps have gotten to know I never body shops to do the estimates really want to be able to get out there. It's it's when you have a really hard hit and coming out with the claims adjuster. So it really hard head doing it from a photo and video are really tough because underneath that sheet metal there could be a lot of deanna and you can you can see a little bit, but you can't really get there so that causes more supplements.
Of course is inefficient.
So we've just recently talked to our managed repair wraps because they've been asking can we go back out we have given them you know all the materials they need to be safe, whether its mass or gloves, and both and and it's very it's completely voluntary. So if you do not feel like you want to go out that is no problem. We don't we their first protection as our.
Employees, but they're going out to some of the non network shops to do the estimate sidecars and we think ought to be a good balance of the efficiency with the accuracy and of course, we have haven't set up where the cars outside no one's with them et cetera. So we're really protected and if they go to a body shop and and they see the people aren't wearing masks, we asked them to turn around so we you know.
I think we'll learn more about the efficiency of how how many estimate post co that can we do.
With technology, and we're always testing technology, and I and artificial intelligence to understand that we have so many years of millions and millions of photos could we ultimately have very simple estimates I actually almost right themselves and so we've been testing that for a while ago.
Again, I hope I answered a question, but it really is a balance of accuracy inefficiency, we're having a lot of learnings from co bid, which as you always want to.
Take advantage of something that's not good to say what do we learn from that how will we come out better and more efficient and overall you know we haven't goals for Elie He had any our during this time it so much noise in the data because of excess capacity at this juncture and et cetera, but yes.
We care deeply about efficiency and care deeply about our cost structure, because we know that in order to have competitive cost we have to how do we have to be very competitive on the expense side.
That appears to have been or final question. So that concludes urban Jason I'll hand, the call back over to you for the cold in script.
That concludes progressive corporations second quarter Investor event information, but a replay of the event will be available on the Investor Relations section of progression was website for the next year you may now disconnect.
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