Progressive Group of Insurance Companies is using a cellular device to help responsible drivers reduce their insurance premiums.
Progressive’s innovative MyRate program may not be for drivers with a lead foot and motorists who heavily use their vehicle during peak times.
But for responsible drivers who have a car that isn’t driven too often, the behavior-based insurance program is coming to a state near you.
Telit Wireless Solutions Inc. and Xirgo Technologies LLC. developed the program, which uses machine-to-machine technology.
In select states, motorists can sign up for the program and receive a small wireless device that plugs into the port of their vehicle. The device allows the insurance company to determine how, how much and when a vehicle is being driven.
“We think this is an innovative application,” said Richard Hutchinson, Progressive’s MyRate general manager. “It fits in with Progressive’s history of innovation.”
For the past 10 years, the auto-insurance giant has been trying to come up with a way to calculate insurance rates for motorists based on individual driving habits rather than relying on prediction indicators such as age, gender and type of car, Hutchinson said. During that time, the company looked at a myriad of technologies, including satellite. Hutchinson said the company couldn’t find a right match in regard to technology and cost.
“A lot of people didn’t think it could be done,” he said.
Enter in wireless technology and a partnership that was formed with Telit and Xirgo. Prior to the Progressive collaboration, the two companies have worked on other projects together.
Telit has developed a small wireless device that can handle a high volume of data and also withstand vibration, said Michael Ueland, VP of sales for Telit.
The cost of the technology has decreased considerably in the past few years and the device is easy to install, he added.
Kris Kelkar, Xirgo president and CEO, said the device plugs into the port of a vehicle and can track speed and time of day the vehicle is driven. The device gets this information by accessing a vehicle’s diagnostic port, which have been installed in all vehicles since 1996. The diagnostic port is located in a vehicle’s dashboard.
Kelkar said the device relays information to a server and a driving log is created. He said the log could be updated daily and is available to the insurance company.
“We are very excited,” Kelkar said of the M2M technology being used by the insurance company.
State rollouts
Hutchinson said the program became available to motorists in Alabama in June and has been expanded to Maryland, New Jersey, Louisiana and Kentucky. The program will also become available to motorists living in Texas, Minnesota, Michigan and Oregon.
In states where the program is offered, Progressive officials say one out of every three drivers sign up for MyRate.
“We are seeing a significant take rate when they are given the offer,” Hutchinson said.
New customers can earn a first-term discount of up to 10% for signing up. Depending on the program features in each state, the premium could decrease or increase when the policy is renewed. A higher or lower premium is based on driving habits. In some states, there will also be an expense for the cost of the device and data transmission.
“Because MyRate could lead to a higher rate for drivers in some states, we want people to know that the program is not right for everyone,” Hutchinson said.
Drivers enrolled in the program can review their driving data on the company’s Web site to “see how their habits are affecting their rate, and, if they choose, make behavioral changes that can lead to real savings,” he said.
Customers with more than one vehicle can also select which vehicle to enroll in the program, For example, a person who doesn’t drive a second vehicle very often could enroll it in the program but decline the option on a vehicle that is driven more frequently.
As the company gains regulatory approval in states, privacy issues have arose regarding the program, Hutchinson said. The company has assured the various state regulatory boards that the company will not use the cellular device to track the whereabouts of vehicles in the program.
Kelkar said there is potential for the M2M technology to be used in other areas of the automotive industry. He said banks that grant auto loans to customers with shoddy credit could use the device to track the vehicle’s location if loan default should occur. The technology could also be used to keep track of a company’s fleet, he said.
“We see a big future in this type of technology,” he said.
