To hear Progressive Corp. President and CEO Glenn M. Renwick tell it, insurance telematics seem to have hit a speed bump.
When the carrier asked motorists if they’d be willing to install a device that would monitor their driving in exchange for potential discounts of up to 30 percent, about 40 percent of survey takers said “no way in hell,” Renwick recounted during a recent conference call with analysts.
This year’s disclosures that the National Security Agency routinely violated privacy protections for years haven’t helped insurers sell people on the benefits of telematics, such as making insurance pricing more accurate.
In only one year, the percentage of telematics executives who believe that such programs will become widely adopted in the next three years has fallen to 22 percent from 30 percent, said Joe Reifel, an A.T. Kearney partner.
Most major U.S. insurers currently offer usage-based insurance programs, which track habits such as braking and mileage. Worldwide, subscriptions for driving-monitoring gadgets and apps are expected to grow from nearly 6 million at the end of 2013 to 107 million in 2018, connectivity trends forecaster ABI Research said in June.
Still, there are challenges to participation, mainly related to privacy concerns.
Participation is increasing but “people are scared” and confused, said Theodore A. Poulos, insurance specialist for the Leech-Bridges agency in Zion, Ill. So far, about 3 percent of clients have signed up.
“This is not a GPS device,” Poulos said. He said consumers’ key concern is that the device will track their location. “We have to educate the consumer.”
“More people are expressing interest and declining to participate,” James P. Kane, president of Hub International Personal Insurance in Chicago, said at the conference.
Pinnacle Actuarial Resources shared results at the conference of an analysis of about 2,000 sentiments expressed on Twitter about Progressive’s Snapshot telematics device over a recent 10-month period.
People not using Snapshot were the most negative. Their biggest concern was privacy, particularly the belief insurers might track their locations despite assurances the technology monitors only mileage, braking and other driving habits.
The tweets were nearly evenly split between people who weren’t using Snapshot and those who were in various stages of using it. In tone, 55 percent were negative, 26 percent were positive, and 19 percent were neutral.
“There’s still an inherent distrust of insurance companies,” said Roosevelt C. Mosley Jr., a principal at Pinnacle. While telematics have “definite long-term potential,” carriers need to address concerns, Mosley said.
Also deterring consumers is the fear devices such as Snapshot will cause rates to rise if their bad driving habits are discovered. Frequent hard braking, for example, can hurt a person’s chances of getting a big discount because it suggests careless driving.
Besides braking habits, the discount for Progressive Snapshot users is also influenced by how many miles are logged each day and how often policyholders drive between midnight and 4 a.m. Generally, savings are greater the less mileage people rack up, and the fewer number of times they drive in the wee hours, which is a more dangerous time to be on the road.
Progressive and other insurers, however, have assured policyholders that the devices won’t be used to penalize them, only to reward good driving behaviors.
Once Snapshot is plugged in to a portal on the dashboard, users can log online to see the latest projected discount. Also visible are a review of specific trips and an overview of driving habits.
Among those using Snapshot, the chance to save money was the main reason for signing up, according to the Twitter sentiments analyzed by Pinnacle. Some consumers also thought the devices might help them become better drivers.
Complaints included the beeping that occurs whenever Snapshot determines a car is braking too hard.
“Listen Progressive Snapshot: You and I will NEVER agree on what a hard brake is, and no amount of beeping is going to change that,” was another tweet that Mosley shared. Progressive defines a hard brake as a reduction in speed of at least 7 mph in 1 second. That would be like going 50 mph and stopping in about 7 seconds.
Jon Inquimboy, product manager for Esurance, said privacy concerns are overblown. He said consumers are “generally intelligent and reasonable” and “have a reasonable expectation that insurers will keep their information safe.” He said Esurance, which is owned by Northbrook, Ill.-based Allstate Corp., keeps such information secure.