Excellent driver? Snapshot lets you prove it
Rising number of Progressive customers seek savings with usage-based insurance device
Photo credit: PROGRESSIVE CORP.
By MICHELLE PARK
4:30 am, January 16, 2012
The monitoring of drivers' real-time behavior behind the wheel to determine whether they deserve auto insurance discounts is gaining traction, with Progressive Corp. leading the pack.
Progressive already offers its heavily advertised, usage-based insurance program, Snapshot, in 39 states, plus Washington, D.C. That geographic breadth eclipses at least two of the local company's competitors — State Farm Insurance Cos. and Allstate Insurance Co. — which have made similar programs available in seven and three states, respectively.
In the nine months since Progressive began advertising its Snapshot program nationwide, its number of participants has doubled to 500,000. The company has found that one of four people to whom it offers Snapshot chooses to participate, and the majority of them receive discounts averaging 10%, said Richard Hutchinson, general manager of usage-based insurance for the company based in Mayfield Village. Protecting its turf
Snapshot measures the mileage someone drives, the times of day someone drives and the frequency of sudden braking. Progressive's program requires the device to stay in a vehicle for six months; after the first 30 days, an initial discount is applied, and after the first six months, a second and final discount is given.
The State Farm and Allstate programs entail perpetual monitoring.
Mr. Hutchinson isn't surprised by the increase in Snapshot participants.
“The majority of drivers subsidize the minority of drivers who are higher risk,” he said. “This allows the majority of people to prove that they are average and better than average.”
While usage-based programs potentially could erode profit margins in the short term due to safe driver discounts, Allstate believes it will enjoy growth in policies with safer drivers, said Steven Armstrong, senior director of auto line management for the insurer in Northbrook, Ill. Plus, the programs are giving insurers “a gold mine of information that will help us transform the way we underwrite,” Mr. Armstrong said.
Progressive developed its earliest form of usage-based insurance in the mid-1990s, but waited to go national until it had gained approval for Snapshot in 35 states, Mr. Hutchinson said. "The $100,000 question'
If Progressive's widespread exposure isn't enough to suggest its dominance in this emerging market, perhaps its legal actions to protect its technology are.
Progressive just last week received its fourth patent for system technologies related to Snapshot. Also, the company has sued Liberty Mutual Insurance — an issue that's ongoing — and Allstate for patent infringement. The case against Allstate was settled last October, when the companies cross-licensed certain patent rights to each other and entered into a trademark coexistence agreement.
Allstate launched its Drive Wise program in December 2010 and is working to achieve nationwide exposure for it by the end of 2013, Mr. Armstrong said. About 10% to 15% of Allstate's new policy holders have been opting in, he said — numbers that exceed expectations.
Like Progressive, Allstate sends drivers who opt in to Drive Wise a device they must connect to their vehicles to allow the sharing of data for discount purposes. Allstate's discounts range from zero to 30%, Mr. Armstrong said.
Bloomington, Ill.-based State Farm began offering usage-based insurance in the summer of 2009 in Ohio. Today, it offers two programs: Drive Safe & Save, and In-Drive, the latter of which is only offered in Illinois. The company's goal is to roll both out to the rest of the country as efficiently and rapidly as possible, State Farm spokesman Dick Luedke said.
Unlike Progressive's and Allstate's usage-based programs, State Farm's features GPS functionality. For Drive Safe & Save, State Farm uses OnStar technology and simply measures mileage. In-Drive measures more than mileage, including how fast drivers make turns, how rapidly they accelerate and decelerate and the times they're driving.
Might this more snoopy form of insurance someday be the mandated norm?
“That is the $100,000 question,” Mr. Luedke said.
Many people in insurance circles predict these monitoring devices are the way of the future, said Robert C. Passmore, senior director for personal lines policy for the Property Casualty Insurers Association of America, which counts more than 1,000 member insurers. However, before the devices are mandated, insurers will need to clear legislative and regulatory hurdles, Mr. Passmore predicts.
Privacy concerns also could stand in the way of mandated programs, Mr. Luedke noted.
“There are certainly people who don't want insurers to know this information about them, and no insurer wants to lose those customers,” he said.
Plus, there are customers with cars that can't accommodate the devices, as vehicles must be 1996 or newer, Allstate's Mr. Armstrong said. But he believes a mandate is possible if, over time, regulators believe usage-based insurance programs result in safer drivers.
Though the answer to the mandatory use question is unclear, there is one point on which insurers agree: The ability to track a motorist's real-time driving habits means calculating risk should become far more precise.
“Insurers have, since the beginning of insurance, been in a race against one another to try to measure risk more accurately,” State Farm's Mr. Luedke said. “It keeps getting more and more sophisticated.”
It's little wonder, then, that other insurers are taking a first stab at usage-based programs, including Hartford Financial Services Group Inc., which recently announced plans to launch a pilot program in the first half of 2012.
Progressive's Mr. Hutchinson said he believes the voluntary product will continue to build in popularity, not only because safer drivers are hungry for the discounts, but also because of the information the technology could provide people about themselves and their vehicles: Am I a good driver? Is my teenager a good driver? Where is my car? Did I leave my lights on?
Mr. Hutchinson said Progressive hears from people who want to know what they can do to change their Snapshot results, and also from people who say they are more aware of their sudden stops and have stopped driving as much at night.
“People like the empowerment piece of this,” he said.