Progressive Inks First Licensing Deal for UBI Tech with USAA

Progressive agreed to license its usage-based insurance (UBI) technology to USAA in its first deal since the insurer publicized its terms for licensing late last year.

USAA, which serves members of the military and their families, will be allowed to start using Progressive’s UBI technology in April 2015 but “will not rate insurance based on its customers’ driving habits” before that date, according to the agreement.

The lease will run through April 2022, according to Progressive.

To license the technology, which powers Progressive’s Snapshot discount program, USAA will have to pay Progressive a licensing fee equal to 0.02 percent of its total personal auto insurance premiums. If USAA’s premium volume doesn’t fluctuate too much between now and 2015, that could amount to an annual licensing fee of about $1.7 million.

Progressive currently owns several patents behind its Snapshot program, which bases coverage rates on driver behavior, monitored through a patented in-car device that records driving data. Under Snapshot, safer driving habits like driving fewer miles can net a participating policyholder a discount on coverage.

“We have found that key driving behaviors predict the likelihood of a claim far better than traditional insurance rating variables alone,” John Sauerland, Progressive’s personal lines group president, said in a statement. “As insurers realize the benefits UBI offers consumers, it’s critical they deliver programs that reflect responsible intellectual property practices.”

The U.S. Patent and Trademark Office awarded Progressive its sixth patent related to UBI coverage last November. That patent granted the insurer intellectual property rights to in-car audio technology alerts for UBI participants while they are behind the wheel.

The deadline for licensing applications ended last month. Erin Hendrick, a spokeswoman for Progressive, told Online Auto Insurance News (OAIN) that the insurer cannot release details on licensing deals that are in-the-works with other companies, saying only that “we’re in active talks with other carriers.”

Hendrick said that the deal with USAA, announced Friday, was the “first licensing agreement we’ve publicly announced” since the licensing program was disclosed last December.

Snapshot is currently available in 44 states and Washington D.C. and accounts for more than $1 billion in premiums, according to the insurer.

About Charles Nguyen
Charles Nguyen is an enterprising journalist who reported for Patch.com and the Desert Dispatch and was the editor in chief of the Guardian (the twice-weekly newspaper at the University of California, San Diego) before coming to Online Auto Insurance News.

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