Remember how on every long car trip, there comes a point where the toll of the road overtakes the joys of the journey?
Progressive, the nation's fourth-largest auto insurance company, seems to have reached that intersection with its Snapshot usage-based insurance program. It uses an on-board monitoring gadget, similar to an airliner's "black box," to collect information about driver behavior.
Henceforth, Snapshot will not only reward safe motorists with up to a 30 percent break on their auto insurance but will also penalize bad drivers with a slight surcharge on their rates.
I immediately pictured Flo, the company's ubiquitous, sardonic brunette pitchwoman, cross-armed and fuming in the back seat, muttering under her breath, "All those years of retakes holding that Snapshot dongle for this?"
A Missouri tryout
The company's annual report to shareholders broke the news this way:
"In our new program that we just began to roll out, we are affording more customers discounts for their good driving behavior while for the first time, increasing rates for a small number of drivers whose driving behavior justifies such rates."
Progressive is piloting its new carrot/stick approach to Snapshot in Missouri, with plans to expand it nationally in May or June. According to the Chicago Tribune, Snapshot program director David Pratt says a surcharge of "no more than 10 percent" of what they had been paying could affect up to 20 percent of Snapshot customers.
Part of a broader trend
But show of hands: Who was really surprised, right? The field of telematics is exploding across the insurance landscape. Whether it's sharing your driving skills, your fitness data or even your own genetic testing with your insurer, the potential is always there for that data to be used against you. After all, underwriters aren't well-compensated for increasing their company's exposure to financial risk.
The fact that the auto insurers have spent millions to present this technological ride-along as a good thing for consumers, both in its upbeat advertising and enticing no-lose premium offers, should give us some inkling of the importance they put on data-mining for dollars in the future. Doubtless the news pleased many shareholders at the company's annual meeting.
But Bloomberg Intelligence analysts Jonathan Adams and Jamie Dranoff question whether introducing the stick to the equation is a smart move so early in this particular car trip.
Will new Snapshot customers be scared off?
"This is a key policy shift," they wrote last week. "The decision to raise prices for some bad drivers may discourage customer acceptance of Snapshot, whose sales grew 28 percent in 2014."
To help counter the inevitable consumer blowback from the news, Pratt announced that Progressive will commence offering new Snapshot customers an immediate discount, rather than making them wait 30 days while their device gathers data.
"The hope is that the immediate benefit will encourage people to sign up," he told Bloomberg.
What's your take? Is Progressive making a smart move for its good drivers by singling out and charging more for the bad ones?
Follow me on Twitter: @omnisaurus
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Veteran contributing editor Jay MacDonald is co-author of "Future Millionaires' Guidebook."