Through its Snapshot product, Progressive prices auto insurance based on a person’s actual driving habits and behavior and in March announced that riskier drivers soon could face rate increases. Previously the insurer had offered discounts to drivers that enrolled in the Snapshot usage-based insurance program after a trial period and had not raised rates based on individual driving behaviors.

“We have to raise rates a little bit for the riskiest drivers,” explains Dave Pratt, managing director of usage based insurance for Progressive. “This enables us to give double-digit discounts to a lot more people, but to offset that, we have to have higher rates for the worst drivers.”

In Progressive’s direct sales channel, more than a third of people who buy auto insurance from the company sign up for Snapshot. However, far fewer sign up for that program through independent agents. Independent told Pratt that the discounted rates were not immediately available to those consumers, making them less compelling, and that  the logistics of delivering and installing the Snapshot device lengthened the sales cycle.

The new policy is intended to increase sales through independent agents, Pratt explains: “We wanted to find a way to bring the discount to the point of sale because we want more people to sign up. And then we want as many people as possible to have a good outcome at renewal, so they get as big a discount as they had at new business or better. In order to do that, we still need to collect enough premium in total.”

Progressive surveyed 500 consumers and found:

  • 84 percent said bad drivers should pay more for their auto insurance.
  • Nearly 80 percent of consumers said that usage-based insurance is a fairer way to price insurance.
  • 90 percent of consumers ages 18 to 34 are willing to try usage-based insurance.
  • More than half don't realize they're paying higher rates due to others' bad driving and 85 percent would be upset to learn they're being charged more because of it

[Progressive opens enterprise 'innovation garage']

In a new marketing campaign, Rate Suckers, Progressive intends to explain the benefit of pricing risk individually, and the benefit of the Snapshot product, which enables the insurer to offer discounts averaging $150 annually to lower-risk drivers. In the ads, “Rate Suckers” jump on and attach themselves to passing cars. The advertised solution is Snapshot, which repels Rate Suckers once plugged into the car’s onboard diagnostic port.

"People are angry that they're paying more for insurance because of the bad driving habits of other people, and they have every right to be—it's just not fair," said Jeff Charney, Progressive’s chief marketing officer. “We all probably know somebody we’re subsidizing. Snapshot helps solve that problem; showing consumers that their good driving can reduce the impact other drivers have on their rate. This campaign is our line in the sand to the industry and a wakeup call to consumers.”

Pratt says it is too soon to understand the impact of the decision to raise rates based on individual driving behavior, but in Missouri, the first state where Progressive adjusted rates upward, the percent of agency customers enrolling in Snapshot has tripled, Pratt says. “About half of Progressive’s sales come from independent agents, so it’s a very important distribution channel for us. The product has to work for both. We haven’t had any renewals come through yet. You have to add on how many of those customers do we keep. We will roll out more states this summer. But we are encouraged.”

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