Cheap Vehicle Insurance, Success of Snapshot Program Positions Progressive for Market-Share Gains
On Monday, insurance giant Progressive announced that, judging by the huge amount of data it has collected from policyholders using its Snapshot device, real information collected about a person’s driving behavior appears to be by far the best predictor of how much it will cost to insure him or her. And if the company is able to successfully defend its usage-based insurance patents, that may mean it’s in a position to see its customer base dramatically improve in both quantity and quality.
The company’s Snapshot program is a discount program in which enrollees plug a data-collection device into their vehicles and let Progressive track their driving behavior—like instances of hard braking and rapid acceleration, the number of miles put in behind the wheel, etc.—in order to determine whether they exhibit safe driving tendencies and deserve a discount. According to the insurer, about 70 percent of drivers who try Snapshot end up being eligible for a discount, although they didn’t say the size of the average discount. It can go up to 30 percent.
Progressive says in its new analysis that before driving behavior was factored into the equation, looking at the number of driving-record points that a person had was the No. 1 way to predict how much the insurer would have to pay out in claims for that particular driver. But actual driving data, the company now says, “is more than twice as powerful” as points in forecasting a person’s claims activity.
And these conclusions aren’t being drawn from a small data set. Progressive first introduced usage-based programs to policyholders in just three states in 2004, but it is now available in 42 states and the District of Columbia, which has left the company has about 5 billion miles’ worth of data culled from about 1 million policies to back up its rating structure.