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Nathan Golia
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Progressive Finds Telematics a Hard Sell

CEO Glenn Renwick says as much as 40% of its customer base is closed off to the idea of usage-based insurance.

Progressive CEO Glenn Renwick had some tepid comments regarding its Snapshot usage-based insurance program on the company's financial results call this week.

According to Bloomberg, Renwick said that 40% of its Snapshot prospects say "no way in hell" would they adopt the program. Privacy concerns are the biggest cited concern, Renwick said.

The article adds:

Selling Snapshot has been “a bigger burden” than many in the company would have assumed given that it can lower customers’ rates, he said. “Intellectually, I kind of go ‘Why wouldn’t 100 percent of people take this option?’”

But insurance customers aren't thinking just intellectually. There's been plenty of downward pressure on auto insurance prices in recent years anyway — and revelations about the federal PRISM program have thrust privacy into the spotlight. That was always going to be a big hurdle to jump for insurers who want to get more insurers on usage-based programs — but it can't be any easier now.

As Bloomberg notes, Progressive has tried to make the case about poor drivers subsidizing good ones with its Rate Suckers campaign — but overall marketing performance has been "short of a breakout," Renwick said. The percentage of direct-channel policyholders who have tested Snapshot has risen about 15% in the past two years.

“We’re body-punching here,” Renwick said in the call, according to Bloomberg. “We’re trying to find the message that actually moves the needle. I think we now understand how significant a burden it is to try to educate consumers to do something that was not the natural buying or engagement process.”

Another interesting note from the article is that Warren Buffet has not indicated any interest in UBI or telematics from GEICO's perspective. Considering GEICO's market share, advertising reach, and pricing strategy — and taking into account Buffet's business acumen — should insurers pause before diving headfirst into telematics? That's something to chew on this weekend.

Nathan Golia is senior editor of Insurance & Technology. He joined the publication in 2010 as associate editor and covers all aspects of the nexus between insurance and information technology, including mobility, distribution, core systems, customer interaction, and risk ... View Full Bio

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opnmnd
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opnmnd,
User Rank: Apprentice
8/12/2013 | 10:02:27 PM
re: Progressive Finds Telematics a Hard Sell
As to Europe, it has to do with the premium being charged prior to the introduction of telematics. most will tell you the discounting here is in the 10% to 20% range, for the effort to have value for the customer, the savings needs to be significant, not just a hundred bucks. There is effort on the part of the policyholder. They need to install the device, make sure no one in the family messes with it or it gets lost while servicing the car, etc. Also keep in mind all the traditional rating factors are pretty much still in place, such as age, marital status, driving record, etc. so the discounting is at the margins. Europe also write individual auto policies, as does Japan and most of the world, where as we write multi-car policies. Multi-car makes it harder to get all drivers to jump on-board the UBI bandwagon.

The one exception is mileage. For the underwriter, this is what we have been looking for, verified mileage! We often feel the discounting for this area has been watered down due to erroneous reporting and unverifiable records. UBI gives us the real data. That being said, it will only benefit those with truly low miles driven, and will compete with non-UBI programs where there is still mileage discounting.

The device does measure your driving habits. While we think because we have not had any accidents or tickets that we are good drivers. Well many folks find is that they are not as good a driver as they thought, so they will be looking at an increase. For everyone that goes down in price, there is someone who goes up.

Promoters point to things like value added services, but those are being taken up by the OEM's and what would be left for insurers are second tier services for those who did not want to pay the subscription fees.

Often is is hard for those of us in the community to see the world of risk as underwriters, actuaries or claims professionals, but that is rarely the way of the policyholder.

We understand the value of our products, how what we do allows society and commerce to function, but they see a price. A price, that actually has been consistently being lowered in real terms for many years, again thanks to companies like Progressive and GEICO that showed us that data matters, as well as low expense loads and power of fees with regard to the bottom line.

Yes connected cars are coming in a big way, and it will change much with regard to the auto insured/carrier relationship. The consumer that has been flirting with the gray area regarding the details of their particular risk, will not be interested in UBI as they will be found out. Those that find out once they opt in that they are not as good a driver as they thought will need to choose between changing their behavior (if they can, it may be a member of their household) or going to another carrier.

As to regulation, the issue here is our system of state by state regulation. I won't go down that road in this post.
Nathan Golia
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Nathan Golia,
User Rank: Author
8/12/2013 | 2:18:56 PM
re: Progressive Finds Telematics a Hard Sell
Thanks for your comment. Can you expand on one point?

"This has worked in Europe because of unlimited liability limits,
which creates teen and problem driver premium levels of $5k to $8k per
year. Saving 15% matters. In the US, those with poor driving records,
and other issues simply buy as little coverage as possible, often state
minimums."

Are you saying that a barrier to telematics' effectiveness in the U.S. might be attributable to the regulatory structure on how auto policies can be developed? Is it even possible/legal to have an entirely UBI product (where your premium is decided based on the telematics data) in the U.S.?

Also, I agree on some of your comments regarding hype Gă÷ but I actually think hype might be a good thing here if the above regarding regulation is true. Connected cars are coming in a big-time way Gă÷ most cars on the road will have integrated computing platforms sooner than I think we realize. I think insurers have an interest in being able to leverage that computing power to create better products. But transparency standards will be hugely important because policyholders must understand what behaviors affect premium and how. Honestly, I think most people, though, would welcome unimpeachable data regarding an accident Gă÷ as long as that data can't be tampered with.
opnmnd
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opnmnd,
User Rank: Apprentice
8/9/2013 | 7:36:07 PM
re: Progressive Finds Telematics a Hard Sell
I have been involved in UBI for a few years and have been greatly concerned over the hype. We as executives need to beware the hype on all "cutting edge" or "market changing" technologies. Listen to who is delivering the message and then do your due diligence to see what their stake is in it before we buy in.

In this case Progressive, a company that has shown the industry the importance of big data, is heavily embedded financially in the technology. The primary rating benefit to UBI is really accurate mileage, and then around the edges is driving behavior and things like time of day. For those who are familiar with rating plans, you will understand that the impact is marginal on the end premium, and while the impact on a large book, such as Progressive's maybe significant, to a smaller regional carrier, it may not be.

For the policyholder, discounting 10% or 15% is great, if you don't mind giving up your data, which by the way is discoverable if an accident case gets to court. The savings to the policyholder are greatest on those with the highest premium, though depending on why their premium is high, they may not qualify.

This has worked in Europe because of unlimited liability limits, which creates teen and problem driver premium levels of $5k to $8k per year. Saving 15% matters. In the US, those with poor driving records, and other issues simply buy as little coverage as possible, often state minimums. Not good for society maybe, but good for the wallet, although maybe just temporarily.

To the point of understanding where the message is coming from. Keep in mind the effort by Progressive to license their "technology" to other carriers. To make a long story short, they are looking for.02% of the entire PL auto book in the US, not just the UBI portion. So if UBI becomes only a small portion of your book, say 25% to 30%, you still get to pay Progressive on your total writings. I believe the total US PL Auto book is in excess of $160 billion. Do you think that motivates a carrier to keep up the hype?

Much of the other talk comes from consultancies that would profit from assisting a carrier with their development, not to mention the builders of the plug in units. There are the value added services providers, and don't forget the conferences. The main conference related to Telematics is put on by a marketing company out of London, that does conferences! Not even Insurance conferences, just conferences.

Listen to there story, but keep a hand on your wallet at all times.
KBurger
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KBurger,
User Rank: Author
8/9/2013 | 6:19:32 PM
re: Progressive Finds Telematics a Hard Sell
Maybe this is an instance where being the first mover/disrupter does not necessarily bring competitive advantage (at least not in terms of revenues/market share)? Sounds like others, including Geico, may be waiting to see a) how this plays out for Progressive, b) what happens on the regulator front, c) further tech advances in telematics. While Progressive has gotten great coverage and high marks from media & analysts for Snapshot, if it isn't translating into measurable business benefits, then harder for others to make the case for it. What would be unfortunate for insurers, though, would be for a non-traditional competitor to be the one to apply the lessons learned.
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