Heard on the
By Roosevelt C. Mosley Jr.
MANY AUTO INSURERS are in various stages of developing and implementing usage-based insurance offerings, which have the potential
to dramatically change the auto insurance market. Usage-based insurance provides information on real-time driving
behavior, allowing insurers to measure directly what they
historically have measured by proxy.
Although most insurance companies are embracing the
potential value of such programs, the reaction of customers hasn’t been 100 percent positive. Understanding both
positive and negative customer reactions to usage-based
insurance plans will be an important component in determining their acceptance by consumers and, ultimately,
their long-term success.
In a 2013 report, Pinnacle Actuarial Resources detailed the results of its research on consumer reactions to
Snapshot, a usage-based insurance plan that has been implemented by Progressive Insurance. While this analysis
was specific to Snapshot, it provides insurance companies with key information on customer reactions to such
plans generally. Progressive has been experimenting with
telematics since the early 2000s and currently has the largest number of customers participating in a usage-based
program in the United States.
The findings show that while customers genuinely are
interested in saving money, they also have concerns about
the use of telematics. This uneasiness ultimately may hinder
the growth of usage-based insurance, even in the presence
of significant potential discounts. For these programs to
reach their full potential in the auto insurance marketplace,
such customer reactions and concerns need to be addressed.
Deploying Social Media
To understand the views of customers on telematics
programs, we analyzed posts on Twitter related to the Pro-
gressive Snapshot program over a nine-month period. Each
tweet was scrutinized to determine the status of the user
and the overall
tone. Although the
world of social media is
an unstructured open envi-
ronment (and very different in
character from a traditional cus-
tomer survey or statistical research
study), the study captured a number of
customer sentiments that are valuable for
insurance companies interested in gauging
consumer response to telematics.
Almost 50 percent of the tweets were from
individuals who didn’t use Snapshot, giving critical insight into why some people avoid telematics.
Of those not in the Snapshot program, 62 percent held
a negative view of it. Based on a review of the tweets,
these negative views often focused on telematics programs
in general, not specifically on the Snapshot program.
Not surprisingly, the primary concern expressed by
those who didn’t use Snapshot revolved around confidentiality. Convincing customers that giving up their privacy is
worthwhile may depend on the size of the discounts they
receive. In the same way that many customers will allow
smartphones to track their location in order to receive the
maximum value from certain apps, the size of an insurance
discount could sway some consumers to adopt telematics.
Beyond concerns about privacy, tweets reflected apprehension growing out of a misunderstanding of how the program
works, worries that rates rise because of program data, and
fears that the program would expose poor driving habits.
Only 12 percent of the tweets from non-Snapshot customers expressed a positive sentiment about usage-based
insurance. Most of these were from potential customers
who liked the concept. They included observations that the
commercials are clever and funny, that Progressive does an
adequate job of promoting the program, and that the idea
of usage-based insurance was interesting.