This Big Fish Should Outpeform Progressive

Progressive (NYSE: PGR) is a well-known insurance company, having the "defensive" qualities of insurance without giving up growth. Root (NASDAQ: ROOT), a much smaller auto insurer, has quickly been capturing market share. Both have a lot in common, but which should prove to be a better pick?

Comparing their insurance products

Progressive and Root primarily offer personal lines of auto insurance. Being larger, Progressive offers a more diverse product line. Commercial lines make up about 13% of premiums written, while property makes up about 4%. It is still primarily exposed to trends in auto insurance.

Younger and smaller, Root almost solely underwrites personal auto lines, focused on doing this well. While it offers homeowners and renters lines, these are not meaningful, and Root does not segregate them from total net premiums earned. This makes it more of an auto pure play for now. Being smaller gives it a better profitable growth angle too. Between 2023 and 2025, Root grew premiums written from $733 million to $1.5 billion. In that same period, Root's combined ratio improved from 133.2% to 98.2%.

Both are also known for doing insurance in a very tech-friendly matter, fitting under the "insurtech" umbrella. As their insurance products are mostly the same too, the key is in how each leverages technology to provide their product.

The difference is in distribution

Founded in 1937, Progressive is an old player that seized on new tech to enhance an existing business. It was first to create a website and sell policies online. It pioneered telematics through the Snapshot program, which monitors driving habits in real time to build data models (in exchange for better pricing to customers). Of course, it has a successful mobile app as well.

Root does these things too, but the core approach is different. Founded in 2015, tech is more deeply embedded into the strategy. Root made telematics enrollment the default, rather than opt-in. Root's data-driven underwriting leans on near-100% participation. While that sounds major on its own, the real difference is how Root scales it, leveraging tech in a way that Progressive and other big insurers didn't: distribution.

Image source: Getty Images.

Management views distribution "as a technology problem". They have developed Root's software to embed seamlessly into the systems of dealers and even manufacturers. The first example of this was the partnership with Carvana, announced in 2021. Root's revenue began to grow rapidly in the years that followed, reaching a GAAP profit of $29.2 million in 2024. It has since replicated this among other partners, fueling continued growth. These partnerships put Root's product directly in front of customers who are purchasing vehicles.

Progressive's growth hurdles

Lacking a similar strategy, Progressive faces the hurdles of its size. With 17% market share, it is the second-largest auto underwriter in the US. Growth depends on out-competing other large rivals and cost optimization. Branching into other lines of insurance remains tricky. Coming out of 2022's costly storm season, Progressive began exiting homeowners markets that were difficult to underwrite profitably, suggesting it's more in a phase of steady growth.

Root isn't so constrained, active only in 36 states at the end of 2025. It can enter others opportunistically and can continue to saturate those that serve them best.

Root is a "big fish" buy

Root is not a David defeating Progressive's Goliath, as the businesses themselves are concerned. Root is more of a big fish in a small pond, taking business from peers much lower on the market share rankings. With less than 1% of US auto market share, it has much more room to grow before it has to butt heads with titans like Progressive.

When looking at Price/Book as a valuation, ROOT trades at 3x , while PGR trades at 4.1x. Root is growing faster, has more untapped opportunities, and is priced for less. These two factors, price and fundamentals, show ample signs of ROOT outperforming PGR over the long run.

Root may not have a charming mascot like Flo, but that's exactly why its distribution strategy is overlooked by the market in the first place.

Joseph Parrish has positions in ROOT. The Motley Fool has positions in and recommends Progressive. The Motley Fool has a disclosure policy.