Progressive Insurance, Behavior Insurance

Progressive Insurance is introducing a new means of tracking their customers driving habits by having customers voluntarily install a device in their car(s) that track several driving characteristics such as braking frequency, braking severity, actual mileage and actual times in order to pinpoint rating models. The pilot program is being launched in Texas next month and they are offering an initial 10% rate discount to the first "trial" customers.

The intent of Progressive Insurance's new driver tracking device is to make insurance individualistic. By tracking customers driving habits to the exact degree, they can tailor rates to that specific customer without having to rely on the customers responses to underwriting questions or expensive databases.

Progressive will also use the information to predict frequency and severity of accidents in order to assist in reducing claims expenses. Insurance companies make money through two primary means: premiums and investments. Insurance companies spend money through two primary means: operating expenses (payroll, fixed expenses, supplies, etc.) and claims. If an insurance company can reduce claims expenses without raising rates, it increases profits without compromising market share. This is the ultimate goal of Progressive's new tracking devise.

We'll see how effective their new "gadget" will influence the rest of the private auto insurance market over the next 12 months. If they are able to increase profits without raising rates and other insurance companies take notice, then Progressive can call it a success.

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