Insurance Blog

Finance Blogs » Insurance Blog » New insurance ‘black box’ penalties

New insurance ‘black box’ penalties

By Jay MacDonald · Bankrate.com
Thursday, April 2, 2015
Posted: 2 pm ET

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.

insurance-blog-now-snapshot-may-cost-some-drivers

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

Get more news, money-saving tips and expert advice by signing up for a free Bankrate newsletter.

Veteran contributing editor Jay MacDonald is co-author of "Future Millionaires' Guidebook."

«
»
Bankrate wants to hear from you and encourages comments. We ask that you stay on topic, respect other people's opinions, and avoid profanity, offensive statements, and illegal content. Please keep in mind that we reserve the right to (but are not obligated to) edit or delete your comments. Please avoid posting private or confidential information, and also keep in mind that anything you post may be disclosed, published, transmitted or reused.

By submitting a post, you agree to be bound by Bankrate's terms of use. Please refer to Bankrate's privacy policy for more information regarding Bankrate's privacy practices.
9 Comments
John
April 02, 2015 at 6:25 pm

I ended the idea of signing up for snapshot a long time ago. The name of the company "Progressive" turns me off. That denotes liberal ideology, which is designed to remove your freedoms and make you behave as socialist think you should behave.
On the other hand, the CEO of Progressive is fawning over Obama and has been, since he was elected in 2008.
I'll take my business someplace else rather than fall for the BS from this liberal/socialist company.