We write personal auto and other specialty property-casualty insurance and provide related services throughout the United States. Our Personal Lines segment writes insurance for personal autos and recreational vehicles. Our Commercial Lines segment writes primarily liability and physical damage insurance for automobiles and trucks owned and/or operated predominantly by small businesses in the business auto, for-hire transportation, contractor, for-hire specialty, tow, and for-hire livery markets. We distribute our Personal and Commercial Lines products through both the Agency and Direct channels.
Personal Lines
Our Personal Lines operating philosophy is to grow as fast as possible, subject to the constraints of our 96 combined ratio goal and our ability to provide excellent customer service. Through this lens, 2015 was another very good year for Personal Lines as net premiums written grew 6% at healthy profit margins, while building foundational elements of future growth through enhanced segmentation, broader product offerings, and restored growth in our Agency business.
Given the competitive U.S. personal lines property and casualty market, it’s critical that we consistently provide a broad suite of product offerings to meet the needs of both consumers and agents. During 2015, we made good progress making our products more competitive, broadening our offerings, and better matching our rates to the underlying consumer risks.
During 2015, we reduced our expense ratio and continued to deploy our latest auto product, which was first introduced in December 2014 and is currently available to more than one-third of U.S. households. This product leverages additional rating variables and external data in order to provide more competitive rates for preferred households, a redesigned package discount that encourages bundling property and auto, and better segmentation amongst no-prior-insurance and repeat customers. Market response has been excellent, with quote volume increases, conversion improvements for more preferred customers, and many agents quoting a greater share of their preferred customers with Progressive. A key element of this new product is our enhanced Snapshot® offering that provides immediate consumer value through an upfront participation discount. Segmentation is enhanced at renewal by confirmation of, or adjustments to, good driving discounts and surcharging a small segment of drivers based on their cost to insure. We saw increased use of our Snapshot program during 2015, as the new upfront discount contributed to higher purchase rates and broader discount distribution drove up overall customer retention. During the year, we also completed a successful pilot of a mobile app that can supplement Snapshot’s current hardware-based monitoring with a software version that can lower hardware costs and improve user experience, while also reducing monitoring costs through the elimination of our data transmission charges. This offering is expected to deploy more broadly in late 2016.
Beyond more competitive product offerings, we’ve been investing in both the breadth of the products we offer consumers and where we offer those products. During the year, we increased the number of agents selling our Progressive Home Advantage® (PHA) property offering from American Strategic Insurance (ASI) by 27%, expanded our offering across distribution channels by entering 5 additional Agency states with ASI homeowners and 19 additional states with Progressive renters, and adding 28 new states to our Progressive Advantage Agency, the in-house agency that sells property insurance direct to consumers. The acquisition of a controlling interest in the parent company of ASI in April now affords us the opportunity to participate in the agency bundled home/auto market in a way never before possible. In conjunction with ASI, we designed a bundled home/auto solution with both agent and consumer benefits never before available from Progressive and began deploying this “Platinum” offering to a select group of agents across several states. Market response has been strong, with volume increases in both quotes and sold policies, higher rates of home/auto bundling, and an overall shift to more preferred customers. Finally, in pursuit of becoming consumers’ destination for Personal Lines insurance, during 2015, we expanded our portfolio of Progressive Advantage products (underwritten by unaffiliated insurers and sold directly by Progressive) by launching travel insurance, wedding/event insurance, and expanding our classic car insurance offering.
As we communicated during our investor day in May, the competitive environment in the independent agency channel resulted in disappointing new application and policy in force declines during 2014, and turning those results around was a top priority for 2015. During the year, the combination of more competitive auto products, more broadly distributed and competitive property offerings, and active management by our field sales organization resulted in positive new policy growth and the restoration of overall policy in force growth for our Agency auto business. A 4% increase in written premium per policy resulted in net premiums written growth in our Agency auto business during the year.
Total Personal Lines growth in 2015 was driven by strong performance of our Direct auto business, which grew new applications close to 13%, added more than 400,000 policies, and increased net written premium 11% over 2014. Growth in the channel was primarily driven by mid-teen increases in the number of consumers shopping with Progressive, resulting from increased media spend and strong consumer response to our messages. From a channel perspective, the vast majority of this shopping increase was due to continued rapid growth of consumers shopping via mobile devices, which now represent about 40% of our Direct auto quotes. Recognizing these ongoing trends, during the year we completed the replacement of our Direct auto quoting systems to improve the mobile shopping experience.
Our special lines products (motorcycle, boat, recreational vehicle, and manufactured home) enjoyed very profitable growth across all products and continue to contribute both a substantial portion of our annual underwriting profit and a large book of preferred customers to whom we can cross-market our auto and expanding property offerings. Providing our multi-product customers a consistent customer experience across our product offerings is essential to building long-term confidence in Progressive, and as we complete the rebuild of our core auto policy processing system, we’ve commenced deployment of the same system to our special lines products.
Customer retention remains disappointing. Our trailing 12-month auto policy life expectancy declined by about 1%, driven primarily by our Agency business, while Direct retention remained essentially flat. During the year, we reorganized several groups within Personal Lines in order to focus additional resources on decomposing and resolving our customer retention challenges. On a brighter note, our more responsive trailing 3-month retention metrics do indicate improvements in the 5% range for auto customers in both distribution channels, so we have some evidence that things are moving in the right direction.
On top of strong business results during the year, we feel very good about the Destination Era investments we made in people, products, and systems to ensure we continue to offer broad distribution of the suite of highly competitive products, which are essential to meeting our customers’ needs throughout their lifetimes.
