Progressive CEO: Popularizing Snapshot Harder than Anticipated

Progressive’s president admitted to investors in a conference call last week that the car insurer has had greater-than-anticipated difficulties in getting consumers on board with its usage-based insurance (UBI) program, Snapshot.

But the acknowledgement about the direct-to-consumer carrier’s flagship UBI program didn’t dull its July financial performance, which in its Wednesday report showed a 72 percent jump in profits compared with July 2012.

Progressive’s net income last month was $101.5 million, up from $59 million in July 2012, while its total revenues also rose, to $1.73 billion last month from $1.61 billion in the year-before period.

Progressive also reported a strong performance in premiums, with net earned premiums increasing by 6 percent.

The company reported that its performance in securities and investments, which had seen major gains in June, was down for July compared with July 2012, dropping 32 percent from $16.9 million to $11.5 million.

President Talks Snapshot’s Obstacles

After first announcing Rate Suckers last November as a then-unnamed marketing campaign that would “inspire people to better understand what Snapshot can do,” Progressive’s president and CEO Glenn Renwick updated investors last week on the advertisements and how promotion has played out in the marketplace less successfully for Snapshot than executives had hoped.

Rate Suckers, which focused on a message that good drivers subsidize bad drivers through their insurance bills, was an example of Progressive “body-punching” to pinpoint the best strategy to bring Snapshot to consumers, according to Renwick, who said that the strategy still hasn’t been finalized.

“We’re trying to find the message that actually moves the needle,” he told investors. “I think we now understand how significant a burden it is to try to educate consumers to do something that was not the natural buying or engagement process with a product.”

According to Renwick, broad surveys show that about 2 out of every 3 consumers would either participate in Snapshot or request more information about the product, which bases coverage rates on drivers’ habits tracked through an in-car device.

However, Renwick said, Progressive found in that same research that a disturbingly high 2 out of every 5 prospective Snapshot users said that there was “no way in hell” that they would enroll in the program.

“Getting consumers to engage in a product that, for the most part, they were never asked to engage in — and what I mean by engagement is literally getting something in the mail, plugging it in — is a bigger burden than I think intellectually many of us might have assumed,” he said.

Renwick said he didn’t want to disclose on the public conference call the company’s latest and most concrete information on consumer interest in Snapshot, but he did peg the rate of Progressive policyholders who enroll in Snapshot by asking for the device at around 35 percent.

Renwick said that 35 percent was “still a long way from a number that we might all like.”

“Intellectually, I kind of go ‘why wouldn’t 100 percent of people take that option?’” he said.

Concerns have centered largely on the protection of privacy in UBI programs using telematics, a type of information technology used by Snapshot’s data-tracking device.

“The real issue is we’re just going to keep body-punching until we find a combination of messages that really make sense,” Renwick said.

Progressive ‘Not Turning Back’ on Snapshot

However, the obstacles haven’t stopped Snapshot from some major developments. For years, the program had been the most widely available UBI offering before a rapid expansion in the market this past year from other major insurers like State Farm and Allstate.

Progressive recently licensed its telematics patents and intellectual property behind Snapshot to USAA, which covers military servicemen and women and their families.

One of the conference call’s participants, identified as Josh Stirling, an analyst at Sanford C. Bernstein & Co., called the agreement “a big deal.”

“I expect peers will see this is a pretty meaningful endorsement on the importance of telematics and your [intellectual property],” he said.

Stirling asked Renwick if other licensing deals are under way, but the CEO declined to provide updates on discussions with other insurers.

“In some cases, we’re not looking to disclose the names of our partners or people we’re discussing with,” he said.

Progressive is also testing an application that would allow Snapshot participants to view their driving data on their iPhone, according to the conference call.

Snapshot participants who have gotten discounts on auto insurance through the program stay with Progressive longer compared to other policyholders, said Renwick, who added that the company is “not turning back” from the program.

“We think there is still a latent demand out there that, if they knew more and appreciated the benefits … then we win in a big way,” he said.

Level Marketing Expenditures Forecasted for Rest of 2013

Snapshot has been a central part of Progressive’s marketing strategy since April 2011, according to Renwick.

He told investors that this year’s advertising expenditures will remain at the same level for the rest of 2013, a shift from last year’s strategy that saw those expenditures reduced in the second half.

“There’s no reason for us to be backing off [of our advertising levels],” he said.

About Charles Nguyen
Charles Nguyen is an enterprising journalist who reported for 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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