Low-risk drivers save money – sounds like a good idea, right?
Well, not everyone is convinced that Snapshot, Progressive Insurance’s “pay as you drive” program, should be the future of auto insurance. It’s one of the most polarizing financial innovations of recent years.
Auto insurance rates are usually set by pooling individuals into groups based on risk. Factors such as age, gender and even credit rating can be used. In other words, if most people like you are unsafe drivers, then it’s assumed you’ll be one, too.
What is Snapshot?
Snapshot has been offered since 2010, although it’s being rolled out over time and still isn’t available everywhere. In case you haven’t seen or heard it mentioned by Flo, Progressive’s highly visible spokes-character, Snapshot is a small device that plugs into your vehicle and monitors your driving habits. If you’re a low-risk driver, you can save up to 30% on Progressive’s standard rates.
What’s “low-risk?” The Snapshot device monitors three things:
- How many miles you drive
- When you drive
- How often you slam on the brakes.
The less you drive, the better. In most cases, Snapshot won’t save you money if you drive more than 30 miles a day.
Progressive also classifies drive times as:
- “High risk” (between midnight and 4 AM),
- “Medium risk” (rush hour)
- “Low risk” (everything else).
Finally, if you decelerate more than 7 MPH per second, this is considered “hard braking.”
You can log in at any time to see how you’re doing on these three criteria.
Progressive says that Snapshot does not have GPS capabilities and therefore can’t track your location. It also doesn’t track whether you’re speeding.
So why are some people concerned about Snapshot?
It’s likely that usage-based rates are going to become more common. Other insurers, including State Farm and Allstate, now have their own versions of Progressive’s device.
While Snapshot is voluntary today, at some point it might be necessary to allow tracking in order to get a reasonable auto insurance rate. And you may be a very good, safe driver who’s unable to get the discounts, because you live too far from the office, or because you have to drive at night, or because you’re in an urban area with more “late brakers” in front of you.
Progressive claims that your rates can only go down, not up, with Snapshot. But is this really true? Over time, as some customers pay less, will the rest inevitably have to pay more? And once “pay as you drive” becomes more widespread, it could be more difficult to shop around for a better rate.
On the one hand, if tracking our driving causes us to drive less, at safer times and at a greater following distance, isn’t that better for everyone, not just the individual? The benefits of fuel conservation, reduced traffic and safety could be substantial.
On the other, is Snapshot the “tip of the iceberg” in terms of monitoring our behavior to reduce our risks? How long before speed and location become additional tools to help some drivers save money but raise privacy concerns in others?
Will insurance companies tell us to avoid certain neighborhoods? Will they track whether we’re listening to music or having a conversation while driving?
And what about tracking other “risky” behaviors? Will the food we buy someday be a factor in our life insurance rates?
Progressive’s approach seems on target so far. It offers consumers a potential benefit from personalization with no
downside, no privacy issues and no obligation to even use it. Is it something you should also be worried about?
There are valid concerns about Snapshot, but in general I think the increased reliance on technology has positive implications for insurance. If tailgating decreases because drivers want to pay less, and as a result the insurance company pays out less, then everybody wins. But along the way, I expect a lot more hard questions from consumers about the data being collected as monitoring evolves from novelty to necessity.
- Mike Weisberger