Telematics devices have typically been hailed as a way for customers to save money on their insurance premiums while granting insurers access to their driving behaviors.
Now, however, auto insurance giant Progressive Corp. is gearing up to deliver news many of its customers won’t be pleased to hear. Last week, the carrier said in its annual report it is planning to increase rates for some of its riskier drivers who participate in its Snapshot program.
“In our new program that we just began to roll out, we are affording more customers discounts for their good driving behavior while for the first time, increasing rates for a small number of drivers whose driving behavior justifies such rates,” Progressive said.
Through insurance discounts, Snapshot rewards drivers who drive less often, avoid hard braking and cut back on travel between midnight and 4 AM. Now, it will begin to “punish” those who do not.
The new program currently applies to new Snapshot customers and is being tested in Missouri, with expansion to additional states slated for late spring or early summer. In addition to the new rate increases, Progressive is also beginning to offer immediate discounts—rather than following the old policy of waiting 30 days—to new Snapshot customers who will be inducted into the new program at once.
Although Progressive characterizes the decision as one that will encourage safer behavior and help it attract only the best risks, some industry analysts expressed dismay at the news.
A Bloomberg Intelligence report cites the low number of Americans who currently sign up for telematics programs, a fact it laments. Under the new program, that number could decrease even further.
“The decision to raise prices for some bad drivers may discourage customer acceptance of Snapshot, whose sales grew 28% in 2014,” the report said.
Currently, 18 to 20 US insurers offer telematics programs to their policyholders, according to a2014 Deloitte report. Though roughly half the driving population views telematics negatively, younger drivers have been quick to embrace the programs and—according to the industry analyst—“the genie is out of the bottle.”
“The industry as a whole is not likely to back to relying only on its traditional methods of assessing auto risks,” Deloitte said in the report.
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