Progressive CEO: Company Will ‘Keep Pushing’ Snapshot Program

The chief executive officer of Progressive Corp., during an investor conference call, said the company's usage-based auto insurance product, Snapshot, has the potential to attract a bigger volume of business, but at a lower average premium.

"I think what I need to focus on and what Progressive needs to focus on is more and more customers all the time, at the right premium," said CEO Glenn Renwick. "As this gets traction ... it will build on itself by reputation."

Progressive reported 2011 net income of $1.01 billion, which is down from 2010's net income of $1.06 billion. The company reported a 2011 combined ratio of 93, which is up slightly from the 2010 combined ratio of 92.4.

The company also reported growth in its personal lines, while commercial lines were essentially flat. The company said it is seeing improved profitability in Florida and New York, two states that have personal injury protection no-fault automobile insurance systems. Renwick said Florida is "a significant chunk" of the company's business and it has been monitoring legislation in Florida that would reform the auto insurance system.

"I would tell you that if the House bill were the one to be ratified by the Senate and the governor, that would be more useful to use than the Senate bill," Renwick said.

The Florida legislature is currently considering both bills, but is running short on time in the legislative session to pass them. Most in the industry prefer the House bill, but Florida Insurance Commissioner Kevin McCarty previously said a combination of the two would be best (Best's News Service, Feb. 7, 2012). McCarty said the current system is rife with fraud that is driving rates up.

Renwick touched on a small variety of subjects during the call, but Snapshot dominated most of the conversation. Investors seemed curious about the product and Renwick even treated one to a look at the Snapshot process. Others prodded about how it is affecting business. The company in 2011 offered Snapshot nationwide for the first time (Best's News Service, March 14, 2011).

"Snapshot in general is working very well," Renwick said. "I'd say it's commercial grade and loss results are matched with the pricing and that gives us a great deal of confidence to keep pushing on this."

Snapshot requires customers to plug in a small device into their car's diagnostic port, which then sends data including mileage, braking, acceleration and time of day the car is being driven, back to the company (Best's News Service, March 14, 2011). After 30 days, customers find out if they are eligible for a discount, based on their driving habits.

The company has been offering large discounts, up to 30%, through the Snapshot program, but Renwick said he has been carefully watching the numbers to make sure the discount structure matches the loss results. He also said new business might be coming on lower average premiums.

Renwick said Snapshot is opening the door to customers the company might not have had access to in the past. He said the product is gaining steam in direct distribution channels and has been slower to adapt in the agency channels.

"We have now credible data that those who come to us through Snapshot and get a discount are experiencing a meaningful increase in retention," Renwick said.

Advertising is helping to spread the word to the market about how Snapshot works and "a lot of the mystery and concern seems to have gone away." He said the company struggled initially in doing that and some ad campaigns weren't as effective as their most recent ones.

Most Progressive companies currently have a Best's Financial Strength Rating of A+ (Superior). Progressive Insurance Group was the eighth-largest writer in 2010 of property/casualty business, with net premiums written of $14.5 billion, according to Best's Review. Shares of Progressive Corp. (NYSE: PGR) on the morning of March 1 were trading at $21.50, up 0.36% from the previous close.

(By Michael Buck, senior associate editor, BestWeek: [email protected])