Catching up with Progressive's UBI Leader

Progressive Insurance is the undisputed leader in usage-based insurance in the United States in terms of users and miles, and the company intends to extend its dominance through a recent spate of partnerships and product releases.

On Thursday, Progressive announced a joint-research partnership with Italian insurer The Generali Group, and Dave Pratt, general manager of UBI (usage-based insurance) met with Insurance Networking News to discuss different theories and practices in UBI, the imminent launch of Progressive’s new multi-state smartphone-based UBI technology, and the rollout of Smart Driver discounts, which are based on behavioral data gathered by OnStar, in partnership with General Motors.

INN: What makes Generali a good partner for Progressive?

Pratt: They are working on similar problems in Europe and they are an enormous insurance company. They operate in maybe 60 countries, but they don’t compete with us in the U.S., so it seemed like a good opportunity to collaborate on some shared research that we can both use in our respective markets. We are going to develop a list of ideas for product research. For example, what sorts of things are good predictors of driving risk? We’ll do the research and share the results and use that in our respective countries. Generali has something like a million vehicles in Italy with installed [telematics] devices, so they have a big fleet that they are collecting data from. They use that data effectively in the claims process, and that’s something we don’t currently do in the U.S. They can detect that a crash has happened, then they can reach out to the customer and offer assistance, whether it’s emergency or roadside, and they can accelerate the resolution of the claim by helping find a repair facility and get that arranged. So it shortens the cycle time.

INN: What are some of the benefits to your company?

Pratt: What we get out of it is improvements to our scoring algorithms and insights that help us change our business processes. We are not focused on which technology works best. On the technology side, we have the partnership with GM and the shift to mobile.

INN: What are some other differences?

Pratt: Their customer value proposition is very different from ours. Snapshot is free, you give us your driving data and get a discount. They actually charge for those claims services as a product. It’s 69 euros per year to buy this service, but you also get a discount for safe driving. We don’t have any definitive plans to use this for claims, but it’s something we want to study and we have a partner who can help us with that.

INN: Does it matter that they are in another country? Driving in Italy is radically different than driving in the U.S.

Pratt: They have very different scoring formulas for evaluating driving, so that’s another opportunity for us to study – maybe there’s a combined solution that’s better than either one separately. How’s their formula different? We’ve built a model that is a basic statistical analysis of claims data. We know, for example, that people who have a lot of hard brakes are more likely to have an accident. MyDrive Solutions, which is a subsidiary of Generali, has a system that is based on observing expert drivers. They partnered with another organization, RoSPA -- the Royal Society for the Prevention of Accidents – so their score is based on comparing your driving against these experts. It’s a very different approach to creating a score. If you compare driving in Boston to driving in Ohio, those are very different as well. I’d be surprised if that were a big problem. Across the U.S., we have very different environments but there are key behaviors that are predictive. The same activities are dangerous in both places.

INN: What's going on with the mobile end of UBI at Progressive?

Pratt: We’re launching our mobile app soon. This will be the first time we’ve actually used the phone for driving measurements. We really wanted to make sure that the data and the user experience were good. We are going to launch that – the real thing that’s attached to policies -- in a few states later this year.

And GM just launched its Smart Driver program in May. We need three months worth of driving data. Then we score it anonymously and tell GM, who relays a discount to the driver. We’re now three months into this and starting to score these things and sell insurance. It’s become a real thing.”

INN: Auto fatilities have increased 7.2 percent in 2015 compared to 2014. What’s to be understood from that?

Pratt: I don’t know why fatalities are up, but it seems reasonable to say it’s due to distracted driving. You can see it when you drive to work; people are fiddling with their phones. It’s horrible. But one of the things we will collect is how people are using their phone while they are driving. And then we can show that to the user and encourage them not to do that.

INN: The Progressive app will know when people pick up their phones when they’re driving? 

Pratt: Yes. We will know when you have your phone in your hand while you’re driving and be able to distinguish when you are using it to make a phone call, or some other activity, and we will be able to highlight those periods when you were using it. That feedback will be in the product we make available this year. But we are not using it for rating. We will make that clear that it doesn’t affect your price and that we are trying to give them information to make them safer. The challenge for us is what kind of feedback makes people safer.

INN: Why would you not use the fact that people were handling their phone in the rating process or to assign liability?

Pratt: Eventually we will, but we don’t have any actuarial data to assess how dangerous it is. Most of the studies you read are more lab-based studies. Two years from now we will have real insurance actuarial data to assess just how dangerous is really is to handle your phone while driving. If we can make driving safer with some sort of feedback on the app, or other incentives, like bigger discounts if you avoid handling your phone while driving, we might be able to have a meaningful effect on driving safety.

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