Progressive sees connected cars impacting claims frequency and severity
As automakers ramp up investments in connected-car technology for added vehicle safety, Progressive is evaluating the impact the advanced systems are having on claims frequency and loss severity.
The Ohio-based carrier is witnessing above average rates for replacement cameras, sensors and headlights in its growing pool of claims data for automobiles with the add-on technology, it said during its Q2 earnings call with analysts last week.
Only two percent of Progressive’s current customer pool is equipped with the technology to date, but the number is growing. The insurer is experiencing a gradual shift by policyholders toward cars with level 1 and 2 autonomy features, it says. Progressive defines these early levels of autonomy as vehicles with driver assist functions installed, such as auto braking and lane keeping sensors.
“We’re working really hard not only with our own data, information from HLDI [the Highway Loss Data Institute], but also with third-party data to really try to understand the specific technologies that are on vehicles and which ones show the most promise in reducing frequency so we can incorporate them into our pricing,” said John Curtiss, Progressive’s personal auto product development leader.
As vehicles continue to don more autonomous tech, the product equation for insurers also gets a lot more complex, he added. The reality of AI algorithms one day operating cars while also monitoring environmental surroundings will force carriers to rethink regulation, data privacy and security.
The more immediate problem is the cost of repairing automobiles with safety features after collisions. OEMs may soon require scans to certify that replacement parts are working properly, adding $200 to $300 for a claim, progressive says.
“These technologies are often sold in packages,” said Curtiss, conceding the individual technologies may not be additive only “helping to avoid the same types of accidents.”
Progressive does not have sufficient data yet to determine whether accidents are less severe with safety-enabled vehicles, both on the damage or collision side, it says. For now, the insurer is making pricing adjustments for certain technologies, like auto braking, which it can confirm are on the car.
“The amount of vehicles with this technology in the fleet is a very, very small percentage,” said Patricia Griffith, CEO of Progressive. “And so we follow that data all the time. And as soon as we can correlate that with loss costs, we’ll be able to do that in both the channels [personal and commercial] and really every segment.”
Snapshot remains an integral part of the insurer’s strategy to segment customers and gather driver data. Progressive has gathered more than 20 billion miles of data since launching the usage-based insurance service in 2011.
Its mobile app, introduced last December to complement its dongle device, has recorded 30 million miles and nearly 3 million trips, as of the end of June. The smartphone application is available in 31 states with multiple rollouts planned this month.
“Ultimately, you want to be able to have the cars talk to us directly,” Griffith said, highlighting its long-standing partnership with General Motors to leverage the automaker’s OnStar program to issue customers quotes.
“We want to continue to lead in the UBI space,” Curtiss added. “We are doing some work on distracted driving to see if there are new variables that we can include in our scoring algorithm. We’re also testing ways to potentially provide better feedback to consumers, to help them become safer drivers. And we’re evaluating ways to identify more third-party data opportunities so we can expand the footprint of our Snapshot product.”