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Progressive's Snapshot is seen in this image provided by the insurer. (Provided by Progressive)

Update: Progressive Snapshot drivers to get discounts sooner, bad drivers to pay more

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Insurance | Technology

Progressive is offering discounts immediately for Snapshot customers but penalizing bad drivers in a new policy that will be expanded to more states, the company told Bloomberg News in an article published Tuesday.

Progressive had told investors in its annual report published in March that it would do so, but elaborated further on its plans to Bloomberg.

“A challenge I have documented previously is getting our Agency channel customer acceptance rate for Snapshot as high as we believe it could be based on comparable results from consumers directly accessing the product,” CEO Glenn Renwick wrote in the letter to shareholders. “A modified form of the product, advancing part of the expected discount to the point of sale, proved to be a welcomed modification in our introduction of the product to our new Massachusetts agents. Not without risks of rate adjustment for those whose actual driving behavior does not match our a priori estimate, early results suggest this will go a long way to making the concept more agent and consumer friendly. Our expansion of the modification will be ongoing during 2015.”

Translation: You get an advance on your discount when you get Snapshot, as was done in Massachusetts, but if you don’t drive well, your rates rise, according to Bloomberg’s report and our parsing of Renwick’s letter.

Drivers won’t have to pay back the discounts, Progressive spokeswoman Amanda Lupica said Monday.

Snapshot general manager David Pratt told Bloomberg the discounts had applied after 30 days in the past but now are available immediately. He estimated 20 percent of drivers would pay more after a year, while the rest would keep the savings or even pay less.

“The hope is that the immediate benefit will encourage people to sign up,” he said, according to Bloomberg.

Here’s a look at the technology from Crain’s Cleveland Business:

Snapshot cares about three things: Your braking habits, how much you drive, and when you do it. (It doesn’t like midnight-4 a.m. drivers.)

The company is also evaluating GPS, which could possibly lead to the company taking speeding into account, according to Lupica. This could be frustrating on a freeway, where it seems like the natural flow of traffic is at least 10 mph over the limit.

“This is a key policy shift,” Jonathan Adams and Jamie Dranoff wrote in a Bloomberg Intelligence report Tuesday, according to Bloomberg. “The decision to raise prices for some bad drivers may discourage customer acceptance of Snapshot, whose sales grew 28 percent in 2014.”

2013 piece by Consumer Affairs indicated Snapshot would penalize poorer drivers, but Lupica confirmed to Repairer Driven News that the recent move was indeed a first for the company; Snapshot results in the past had only been applied to give better drivers discounts, she said.

She said the new initiative was in place in Missouri, and Snapshot’s general terms have already been updated to reflect that. It was likely to expand to more states this summer.

“Things in Missouri are going well,” she said.

This could affect collision repair by raising drivers’ rates to the point where the policyholder drops collision and comprehesive coverage or takes a higher deductible. The latter could then cause a driver in a collision to either opt against paying out-of-pocket for smaller repairs or be unable to meet the deductible and get the vehicle back on the road at all if the damage is more extensive.

Clarification: An earlier version of the story was inaccurate about the prior scope of Progressive Snapshot’s effects on poor drivers. A Progressive spokeswoman has confirmed that Snapshot penalties for bad driving was a first for the company. Indications on Progressive’s website that this had already been the national policy referred to the Missouri trial launch of the program, she said.

More information:

“Destination Ahead: The Progressive Corporation 2014 Annual Report”

Progressive, March 2015

“Progressive to Charge Risky Snapshot Drivers More in Shift”

Bloomberg, March 24, 2015

Featured image: Progressive’s Snapshot is seen in this image provided by the insurer. (Provided by Progressive)