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Progressive Insurance on OEM-based UBI models and the roadmap ahead

“The opportunities to advance UBI may reside in the use of smart technology, like mobile and original equipment manufacturer (OEM) telematics.”- Dave Pratt, General Manager(UBI), Progressive Insurance

Dave Pratt

For years now, industry experts have debated whether or not UBI models would take off, and essentially re-orient the motor insurance industry. Various insurance carriers across the globe have tested  UBI-based products while many other have thought or are implementing it at a slow and steady pace. There have been many successful profitable models around these products and few of them have gained a widespread success. The US-based Progressive Insurance is one such company which can be named as the ‘inventor’ of UBI or an ‘undisputed’ leader in this space. Progressive Insurance released its telematics offering, Snapshot, in 2011 and has continued to adjust its messaging and marketing tactics around the product ever since. It provides safe drivers the opportunity to earn a discount on their insurance based on their actual driving behavior. As a matter of fact, Progressive so far has collected over an overwhelming 10 billion miles of driving data and is still counting. 

Always keen to learn and earn more in the telematics field, Telematics Wire interviewed Progressive’s Dave L Pratt who is looking after the companies UBI solution and market ‘go-to’ strategies. Dave is Progressive’s General Manager for Usage Based Insurance. Prior to his current role, Pratt has held various other positions with Progressive, including countrywide leadership roles in marketing, product management and product development. Before joining Progressive, Pratt worked at Bain & Company in Boston, MA. He earned his bachelor’s degree in electrical engineering from Duke University and an MBA from Harvard Business School.  

Here is how it went like……:) 

How has telematics been useful for the insurance industry in past few years?

Usage-based insurance is a huge shift in how consumers think about and interact with their insurance company. It reaches beyond traditional non-driving rating variables that have been used for decades to set pricing and it moves to measuring actual driving, which has proven to be the most predictive rating variable yet by carrying more than twice the predictive power than traditional insurance rating variables. It also gives consumers the opportunity to prove they’re safe drivers. Because it’s such a relatively new insurance concept, building awareness and educating shoppers about Snapshot has taken some time. We began advertising Snapshot in 2011, and since that time, we’ve seen adoption grow. We’ve tested a number of different messages to explain the idea of UBI, and we continue to evolve our advertising and messaging. We think that continued awareness among consumers will drive adoption

 What is the general consensus among insurance companies when it comes to this merging world of telematics and insurance? Why are some still not so enthusiastic?

We began our usage-based insurance program over 15 years ago, and over the years we’ve seen more competition in the space. In 2013, Snapshot was responsible for $2 billion of Progressive’s auto insurance written premium. There’s clearly a market and the competition has taken notice. We’re even seeing other carriers launching national advertising campaigns of their own, something we began in 2011. More advertising should lead to greater awareness among shoppers, driving even greater adoption.  

 You are collecting data from more than a million vehicles. What are some of the key findings/learnings of such huge amount of data? Were those helpful in expanding Progressive’s UBI appeal in the market?

Traditionally, insurers have relied on non-driving variables to price insurance like age, driving record and marital status. Those non-driving variables are still used today, but measuring actual driving gives us even better insight. Snapshot gives drivers the chance to prove they’re a safer driver and we’ve discovered that actual driving behavior carries more than twice the predictive power of traditional insurance rating variables.

 Progressive’s Snapshot has been acclaimed as the ‘best UBI product so far’.  What is the roadmap ahead for Progressive?

We believe opportunities to advance UBI may reside in the use of smart technology, like mobile and original equipment manufacturer (OEM) telematics. OEM’s in-car technologies have the capability to transmit driving data, so we’re exploring options like this that would ultimately replace the customer’s need to plug in a separate device. We’re also exploring using technology people already carry with them, like smartphones, to do the same measurement. We’re currently working with application developers to try leveraging mobile phones to measure customers’ driving behaviors. There are a number of challenges to overcome, like distinguishing driving from other movement and the accuracy of the measurement, but this is a very entrepreneurial space right now and we’re seeing promising results in our initial tests.

 Google’s Open Automotive Alliance (OAA) is working on standardizing the in-car data?  Do you feel the need of having such data standards for UBI? Would this help in a long-race?

As the as the innovator in usage-based insurance, we built all of our systems from scratch and they’re working well for our collection and analysis of the data.  Because we already have these systems working well, we haven’t explored other data standards.

 Snapshot must have undergone several changes as the market for UBI in Unites States matured. What were those changes exactly? What is the current status of Snapshot?

Progressive has been in market with its telematics program for more than 15 years. We’ve continued to evolve and change our program based on the insights we’ve learned from the data we’ve collected and to leverage the latest technology available. Progressive has seven U.S. patents covering usage-based insurance methods and systems.

 Progressive began working on the concept in 1998 with a program called Autograph. In 2004, a new version of the program called TripSense® was piloted. Progressive rolled out MyRate® in 2008 and evolved the product into its current form, Snapshot in 2010. Over the years, the device has evolved from a large, mechanic-installed system to a sleek, pocket-sized device that plugs into a car’s on-board diagnostic port.

Today, Progressive is the leader in usage-based insurance with more than 2 million vehicles that have participated in its program. We see about a third of customers who shop with us directly by phone or online opting in to the program. Since introducing its first wireless device in 2008, Progressive has collected over 10 billion miles of driving data and the program is available in 45 states and the District of Columbia.

Does Progressive have any plans to expand its outreach in the Asian market in the near future?

We are currently only looking at the U.S. market for our Snapshot program. 

If you wish to read similar articles on UBI, please go to the Insurance Telematics section. 🙂 

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