Our recent report on Real Insurance's mileage-only pay-per-drive policy raised, once again, the question of what it will take to get drivers to use such programs. Industry observers have predicted the resurgence of telematics (the monitoring of driver behavior via telemetry) but privacy concerns continue to shape insurers' pay-per-drive strategy, as the Real Insurance example demonstrates. The Australian insurer bypasses the "Big Brother" fears associated with telematics-based pay-per-drive programs by dispensing with telemetry all together and relying instead on customer-reported mileage alone.

Progressive has struck a different balance, dispensing with location information, but keeping the telemetry. The Mayfield Village, Ohio-based insurer has also addressed cost concerns that dogged Norwich Union's use of Progressive's patented methodology and technology: getting the "black box" that registered the telemetry proved prohibitively expensive.

Through its MyRate program, Progressive supplies a small, portable device that can easily be plugged into the on-board diagnostic (OBD) port of many car models built after 1996. The device delivers a much richer portrait of driver behavior than Real Insurance's mileage-only plan by recording mileage, braking and acceleration, and time of day. The device periodically transmits that information wirelessly back to Progressive.

With MyRate, Progressive has struck a compromise: the insurer loses valuable location information that it could use for underwriting purposes, but the carrier thus reassures customers uneasy with the idea of their insurer (or anyone else privy to the recorded information) tracking their every move.

Will that be enough for Progressive's Pay As You Drive to take off this time? Though the carrier has not reported any business metrics, Progressive claims that customer adoption has been promising. MyRate is now available in seven states and one out of three eligible drivers (e.g., those whose car has an OBD port) have accepted Progressive's offer to use MyRate, the carrier says.

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Topics: What We're Thinking

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