Key driving behaviours better indicators of risk than traditional rating variables: Progressive

Key driving behaviors — for example, actual miles driven, braking and time of day of driving — can predict the likelihood of a claim far better than traditional insurance rating variables such as a driver’s demographic profile, age, and the year, make and model of the insured vehicle, research by Progressive suggests.

Progressive released new findings from an analysis of 5-billion real-time driving miles, concluding that driving behavior has more than twice the predictive power of any other insurance rating factor.

Loss costs for drivers with the highest-risk driving behavior are approximately two and a half times the costs for drivers with the lowest-risk behavior, Progressive says in a press release. The company believes the results suggest auto insurance rates can be far more personalized than they are today.

Progressive has been collecting and analyzing real-time driving data for 15 years. It says it has doubled the number of miles it has analyzed in the last 18 months since the launch of Snapshot, a usage-based insurance (UBI) program.

“It’s a case where the data confirms everyone’s intuition,” said Progressive president and CEO Glenn Renwick. “We believed that driving behavior was the most predictive rating factor — but didn’t expect the difference to be this dramatic. Actual driving behavior predicts a driver’s risk more than twice as strongly as any other factor.

“It shows that we’re not members of an arbitrary actuarial class — we’re individuals with our own set of driving habits, which should be reflected in the price we pay for our insurance.”

Progressive found that 70% of drivers who signed up for its Snapshot UBI program paid less for their insurance, with customers saving an average of $150 a year.