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Auto insurance Snowden effect

By Jay MacDonald ·
Tuesday, August 13, 2013
Posted: 6 am ET

A couple of years ago, it must have seemed like a drive in the country when Progressive launched its Snapshot program, which claimed consumers could save as much as 30 percent on their auto insurance rates if they just gave the insurer an electronic peek at their driving habits.

What a difference a few data breaches make. It seems the growing public concern surrounding electronic surveillance, most recently fueled by former National Security Administration contractor Edward Snowden's startling revelation that spies will be spies, has many drivers looking askance at Progressive's onboard driving monitor, Snapshot.

Snapshot snap judgments?

Last week, Progressive CEO Glenn Renwick admitted to investors that Snapshot's marketing push has hit some rough road with consumers. By the company's estimate, roughly 30 percent of drivers were comfortably onboard with Snapshot, 30 percent wanted more information and 40 percent flat-out refused to embrace the gadget.

"Intellectually, I kind of go, 'Why wouldn't 100 percent of people take this option?'" Renwick said. Nevertheless, he admitted that Snapshot marketing, while "very acceptable, but short of a breakout," has become a "bigger burden" to the company than expected.

Up until a few years ago when usage-based insurance (UBI), aka "pay as you drive" plans, arrived in the consumer market, auto insurance was underwritten based on hard data: your age, the make, model and year of your vehicle, your ZIP code, credit ratings and claims history. The insurance company would compare your profile to that of its other drivers and charge you a premium based on the pool's collective accident risk. Both you and your insurance company save by spreading the risk in this way.

While the prospect of cutting your auto insurance premium by a third appeals to most of us, it appears many are cautious about how much information we share, especially data that could potentially be used against us down the road, so to speak.

Snapshot advertising gets a tweak

Although Progressive tried to calm consumer heebie-jeebies by, for instance, leaving GPS off its Snapshot device, its effort to sell Big Brother as a slightly less-obnoxious little brother fell short of company expectations. Its new pitch to consumers now focuses less on "trust our gadget" and more on "Look at all the rogue drivers ('rate suckers') who are making driving more expensive for the rest of us."

One interested party who no doubt took note of Progressive's heart-to-heart with shareholders was Warren Buffett, whose Berkshire Hathaway owns Progressive's arch rival, Geico. The gecko has yet to introduce a UBI product. While Buffett told his shareholders in May that he was monitoring Progressive's Snapshot "with interest," he admitted that, in his view, there are other ways to attract customers.

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Jay MacDonald is a Bankrate contributing editor and co-author of "Future Millionaires' Guidebook," an e-book by Bankrate editors and reporters.

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Altadena Traffic School
September 29, 2013 at 7:31 pm

At the very least this thing can keep you from getting into an accident or getting tickets.

We get a lot of people on the opposite end of all this - they're dealing with traffic court and want to keep their insurance from going up.

I think the whole point of this for Progessive is that they're not anxious to pay out anything.

August 14, 2013 at 5:38 pm

bw. I got the whole 30% discount ($360.00 per year) at the end of the monitoring period. I do not like the intrusiveness of technology in relation to my freedom, but I also choose my battles. I had to tick off a lot of drivers to earn 30%.

My Thoughts
August 14, 2013 at 5:25 pm

Do people know that as of November 2014 the US government is mandating this contraption on all new cars and that Ford and many others already have them installed????

August 14, 2013 at 5:09 pm

You gotta be nuts to fall for this. If you think the IC's won't ever use this info to pare down your driving habit's so they can custom raise your rate's, ie: more than 10 mile's a day, speed, even maintenance. Anyone who goes in for this kind of monitoring deserves to pay more, and eventually you will.