For years, insurance companies have said their voluntary driver-monitoring programs rewarded good driving but didn’t penalize bad motoring skills. Now, Progressive says it will impose a surcharge on aggressive drivers using its Snapshot device.
Currently, the change is effective only in Missouri and affects only new participants, spokeswoman Amanda Lupica said. It’s likely to be rolled out to additional states, she said.
In its recently released annual shareholders’ report, the company revealed its plans for its Snapshot program, which, in the industry, is commonly called telematics, pay-as-you-drive or usage-based insurance.
A device installed in the car is one way the information is gathered for the insurer.
“In recent years, we have employed a ‘discount only’ model for usage-based rating,” the Ohio-based company wrote in its annual report. “In our latest model, introduced in one state in December 2014, we are affording more customers discounts for their good driving behavior, while offsetting with surcharges for a small segment of drivers.”
In recently updated Snapshot terms and conditions available on the company’s website, Progressive prominently mentions the change.
“Some customers who drive more aggressively will receive a surcharge at renewal,” it said. “In these states, customers can opt out of the program, and we won’t consider their Snapshot experience at all.”
Usage-based insurance programs historically have given discounts for people who drive few miles, who don’t drive during the wee hours of the night and who have few incidents where they apply their brakes hard.
Another tweak to Snapshot is giving users an initial discount as soon as they sign up, instead of having them wait to have their driving assessed.
To offset the cost of that initial discount, Progressive will charge higher rates for the worst drivers in the program.
Eight of 10 Snapshot users get discounts, with the rest getting either no discount or a “small” surcharge, said Dave Pratt, Progressive’s general manager of usage-based insurance.
What is small?
“No more than 10 percent” of the rate they had been paying, he said.
In 2014, Progressive generated more than $2.6 billion in premiums with customers who are part of its Snapshot program. Progressive’s net premiums in 2014 were $18.7 billion.
Allstate doesn’t have a surcharge for its Drivewise program now and isn’t planning one in the future, spokesman Justin Herndon said.
State Farm’s Drive Safe & Save continues to be a discount program, spokeswoman Missy Dundov said.