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New Research on Auto Insurance Pricing Finds Driving Behavior Can Predict Accidents with Twice the Power of Other Risk Factors

Source: Progressive

Posted on 10 Jul 2012 by Neilson

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ProgressiveProgressive today released new findings from an analysis of five billion real-time driving miles, confirming that driving behavior has more than twice the predictive power of any other insurance rating factor. Loss costs for drivers with the highest-risk driving behavior are approximately two and a half times the costs for drivers with the lowest-risk behavior. These results suggest auto insurance rates can be far more personalized than they are today.

Progressive has also found that 70 percent of drivers who have signed up for its Snapshot UBI program pay less for their insurance. Now, it’s expanding access to Snapshot to all drivers—not just Progressive customers— who can take a free test drive of Snapshot, and after 30 days find out whether their own driving behavior can lower the price they pay for auto insurance.*

"The consumer was right all along," said Glenn Renwick, Progressive’s President and CEO. "For most, the rates they’re paying are higher than the risk they actually present—and in many cases, much higher. Until now, insurers had no effective way to capture actual driving behavior and factor that into the rates they could offer. But we have made a meaningful start toward personalized insurance pricing that’s based on measuring real-time driving behavior—the statistics of one."

Progressive has been collecting and analyzing real-time driving data for 15 years, and the number of miles it has analyzed has more than doubled in the last 18 months since the launch of Snapshot. Snapshot is currently available in 42 states (and the District of Columbia) across every region of the country, and the data is considered a highly representative sample of auto insurance customers and driving characteristics. 

Progressive has found that adding key driving behaviors—like actual miles driven, braking, and time of day of driving—can predict the likelihood of a claim far better than traditional insurance rating variables alone, like a driver’s demographic profile, age, and the year, make and model of the insured vehicle.

"It’s a case where the data confirms everyone’s intuition," added Renwick. "We believed that driving behavior was the most predictive rating factor—but didn’t expect the difference to be this dramatic. Actual driving behavior predicts a driver’s risk more than twice as strongly as any other factor. It shows that we’re not members of an arbitrary actuarial class—we’re individuals with our own set of driving habits, which should be reflected in the price we pay for our insurance."

Over the past few years, almost a million customers have tried usage-based insurance through Progressive, and customers have saved an average of $150 a year. In the past 12 months alone, Progressive has written more than $1 billion in premiums that include a Snapshot-powered discount.

"The name of the game is the quantity of data and the quality of analysis and insight," said Richard Hutchinson, general manager of usage-based insurance at Progressive. "We’ve got a 15-year, five billion mile head start on other insurers, and we’ll only extend our lead as more drivers try Snapshot and put their driving habits to the test.  So we’re simply asking all drivers, 'why wouldn’t you try it?'"

How Drivers Can Test Drive Snapshot

After signing up, drivers will receive a small device that easily plugs into their cars. They can then log into their personal Snapshot page to track their driving behavior and potential savings on a daily basis. After 30 days, they get a price from Progressive that includes a personalized discount based on their actual driving behavior, which they can compare to the rate they’re paying with their existing carrier. Drivers can then choose to buy with Progressive with their Snapshot-powered savings applied at the point of sale, or stay with their current carrier. 

Snapshot bases a driver’s potential discount on three key driving behaviors: the time of day the car is driven, the distance it’s driven, and how many hard brakes per mile the driver makes. The Snapshot device does not have a GPS, and it does not use a driver’s speed in determining the discount. A Progressive customer’s rate will not go up based on their personal Snapshot data; they can only receive a discount from one to 30 percent or see their rate remain the same.

Progressive is the industry leader in the rapidly-expanding usage-based insurance category, and the company has been awarded several patents covering systems and methods for implementing Snapshot. The company has already licensed its innovative technologies, and plans to expand this licensing program in the future while adding to its intellectual property in usage-based insurance.