* Other insurers' customers can trial for 30 days
* Roughly 70 percent qualify for discounts
* Consultant says tracking will ultimately be the norm
By Ben Berkowitz
July 9 Progressive Corp already has
hundreds of thousands of auto insurance customers who willingly
let the company track their driving behavior in exchange for the
chance at substantial discounts, and on Monday the company
opened the door to competitors' clients as well.
Progressive, the fourth-largest U.S. auto insurer, said it
would open its "Snapshot" usage-based insurance program to
anyone who wanted to track how well they drive.
Based on 30 days of driving data, people can earn a
prospective discount on their insurance premiums, which
Progressive would then apply if the user decides to become a
customer. Historically, the insurer said, roughly 70 percent of
people who sign up for the program end up earning a discount.
The Snapshot device, which plugs into a port in cars built
after 1996, tracks behavior like miles driven, braking patterns
and even what time of day a car is used. The new trial program
will be available in 35 of the 42 states where Progressive
currently offers the service to its existing clients.
The company, which has already analyzed more than 5 billion
driven miles, says its driving-behavior data is twice as good as
any other factor in predicting risk, and that loss costs for bad
drivers turn out to be roughly 2.5 times higher than they are
for good drivers.
Yet even for the highly competitive auto insurance market,
Progressive's move is aggressive. The company claims it is the
first time drivers can objectively compare the rate they would
be charged with the rate they currently pay their carrier.
"With the test drive of Snapshot, you do the 30 days, you're
not a customer, you can just see what your discount is," said
Richard Hutchinson, general manager of usage-based insurance for
Already a heavy advertiser via the persona of the perky
sales clerk "Flo," Progressive is planning what Hutchinson
called "a big, big campaign in all dimensions" to promote the
expansion of the program.
"Flo will be everywhere," Hutchinson said. SNL Financial
recently ranked Progressive as the fourth-largest advertiser in
the property insurance industry, spending more than $500 million
on media in 2011.
One of the most obvious fears for consumer advocates is the
possibility that insurers would use the data they gather from
technology like "Snapshot" to raise rates on customers,
especially as Progressive's peers move to catch up with the
insurer and launch their own usage-based programs.
But one industry consultant recently said it will likely end
up being another way around - customers will have to pay extra
to not be tracked by their insurer, given how aggressively the
industry is expanding in that direction.
"Whatever the math will say the rates will have to start
going up on the rest of it," said Robin Harbage, global
marketing and sales leader for consultancy Tower Watson's auto
insurance practice, in an interview that pre-dated the
"It's almost inevitable that the people who aren't using
will have to pay more because the people who are the best
drivers are being self-selected into these programs."
The technology also has the strong backing of
environmentalists. A 2010 MIT study bankrolled by the
Conservation Law Foundation found converting all Massachusetts
drivers to a mileage-based insurance platform would reduce
accident costs and fuel consumption by 9.5 percent.