Progressive's Dave Pratt on the Evolution of UBI
Insurance Experts' Forum, February 12, 2014
When it comes to data standards, Dave Pratt, Progressive’s general manager of usage-based insurance, is most interested in Google’s Open Automotive Alliance, an effort to create a data standard for automotive data.
“We don’t think the [wider adoption of ACORD's telematics data] standards will affect Progressive much at all because, as the innovator in usage-based insurance, we built all of our systems from scratch,” Pratt says. “We’ve already got systems that work well and collect that data, so we are not that concerned about standards.”
Google’s efforts to make its Android operating system the standard for OEM automotive data, however is different. “To the extent that creates a new source of data for us, that could be valuable but it would need to get pretty wide adoption,” Pratt says.
In his presentation at the Connected World Conference in Chicago today, co-located with the Chicago Auto Show, Pratt described Progressive’s 15-year-long effort to take usage-based insurance (UBI) into the mainstream, detailing the evolution of the technology and its benefits to consumers, as well as the insurer.
Pratt says consumer adoption is picking up speed. One-third of Progressive’s direct customers are signing up for Snapshot, he says, and the company now has 9 billion miles of recorded driving data, which consumes 110 terabytes, he said. And, Progressive has 1.5 million UBI customers, up from 1 million a year ago. Adoption will increase, he says, as advertising increases awareness among consumers.
“We started advertising this new, strange idea three years ago, and so it took some explaining,” Pratt says. “Now, if people shop with us, they know exactly what it is and they are ready to sign up. It doesn’t take all that explanation anymore.”
Among other data it collects, Progressive’s Snapshot device takes a speed reading through the vehicle’s ODBII port every second, Pratt says. And while it would be more efficient to access that information directly, Pratt said that OEMs are not yet capable of accurately sampling speed frequently enough, though that is likely to change eventually, he said.
The Snapshot devices also offer consumers the ability to see their driving statistics online, and in comparison to others. The device also offers drivers real-time alerts for hard braking, which helps drivers avoid accidents and has had a measurable impact on helping people drive more safely. Asked if drivers consider them to be intrusive, Pratt said Snapshot users can turn the alerts off, and few of them do.
Regarding the ability of smartphones to collect and transmit driving behavior data, Pratt says there currently are two problems: smartphones’ inability to accurately measure speed, and the number of miles driven, vs. other types of movement, per day. Pratt said the company intends to offer a challenge to smartphone UBI technology companies later this year. A selected number of drivers would concurrently collect driving data through a smartphone and the Snapshot device, and then the quality of the data from both would be compared, Pratt says.
Pratt was guarded about the company’s approach to predictive analytics, except to say that predictive models are the “secret sauce” that gives the company a competitive advantage in the UBI space.
“We can look at [a driver’s data] and compare them to our loss experience and that’s how we can tell that people who don’t hard brake very much are less likely to have accidents. That’s what drives our pricing models,” Pratt says, and that the analysis is done in-house by a staff of statisticians.
Insurers can derive a variety of benefits from UBI, representing several different value propositions.
“We get to keep our best customers longer. That’s really our goal,” Pratt says. “We are not trying to make ourselves more profitable with this. We are trying to attract and keep good customers for a long time. Other companies may take a different approach. We could imagine trying to have higher profit margins, because we can identify the safest drivers, but our approach is to give them discounts and keep them a long time.”
Chris McMahon is a senior editor for Insurance Networking News.
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