Progressive's Flo Thumbs a Ride With Drivers

In 'Game-Changer,' Insurer Offers Device to Monitor Motoring and Reward Good Habits With Discounts

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Flo is watching you.

Starting this week, Progressive 's perky sales clerk will push a new in-car product the company claims will be as transformative for the insurance industry as the iPod was for music -- a device that plugs in your car and tracks how and when you drive.

Progressive 's sales clerk Flo will pitch the Snapshot.

"This will signal a game changer for this industry in an industry ... that has not been seen as a game-changing industry," Chief Marketing Officer Jeff Charney told Ad Age. "We've been in business for close to 75 years and for the industry this is our iPod, this is our big launch."

The device, called "Snapshot," has actually been around for a while, giving policy holders who opt in a chance to earn discounts if their driving habits are up to snuff. But now Progressive will start to put its significant marketing muscle behind the program. In TV, print and digital ads, the auto insurer will promote Snapshot as "our biggest discount ever," in hopes that the program will lure new customers.

Small enough to fit in the palm of a hand, Snapshot plugs into a car's on-board diagnostic port, usually under the dash. Computer chips collect and store the time of day the car is operating, as well as speed -- factors that determine how many miles are driven and if the driver is making sudden stops. The data are sent to Progressive via wireless technology, and users can view their results almost instantly on a website. People who drive fewer miles and less aggressively can get discounts of up to 30% in as soon as 30 days. Permanent discounts can be locked in after six months, after which customers return the devices to the Cleveland-based insurer.

In a nutshell, here's the pitch: If you can prove you are a good driver, you can save more money. "This appeals to people who say, look, 'I'm subsidizing other people, and I deserve a break,'" said Richard Hutchinson, Progressive 's general manager of usage-based insurance.

True to form, Progressive will use a lighthearted theme. One print ad, for instance, shows a man hugging his dog on his lap while driving, and asks, "You don't drive like this guy. So why are you paying like him?" In a TV ad, a smiling Flo pitches the device to a customer in her bright-white insurance "superstore," telling him, "This little baby keeps track of your great driving habits so you can save money." Progressive 's agency of record is Arnold Worldwide, Boston.

Mr. Charney did not give spending figures but said the campaign will "be a heavy blitz for a very good bit of time." Progressive in 2010 spent more than $364 million in measured media, up from $291 million in 2009, according to Kantar Media, as the industry continued its expensive battle for market share. With a 7.6% share, Progressive is the nation's fourth-largest car insurer, behind Geico (8.29%), Allstate (9.96%) and State Farm (18.24%).

Other insurers sell similar products, but none as extensively as Progressive . For instance, State Farm partners with OnStar in some states on a program that tracks miles driven in return for discounts of more than 10% if policy holders drive the national average of 12,000 miles a year. Allstate's "DriveWise" program is similar to Snapshot, but so far it is only available in Illinois, although it has plans to expand to another state this summer. Geico does not market a device, but said it is "monitoring" the marketplace.

Users can view their Snapshot results almost instantly on a website.

Progressive began experimenting with the technology in 1999 in Texas -- but the devices were big, clunky and cost-prohibitive. The technology advanced and got cheaper, and Progressive began rolling it out more aggressively two years ago, promoting it on its website, for instance. Now the devices are allowed in 32 states, and more than 100,000 are in use, Progressive said. The insurer has about 11 million policyholders.

Meyer Shields, an insurance analyst with Stifel Nicolaus, said Progressive is wise to make a big push. In the short term, it could improve profitability because those who use the device tend to drive more safely, at least initially.

"When you give people a gizmo that tracks how they drive, for a little bit of time, they drive better," he said. And in the long term, Progressive will be able to build a detailed profile of its customers, which will allow it to set rates accordingly. Most insurers rely on customer estimates to determine how much they drive each year.

But some privacy advocates say the insurer is going too far. It's a "slippery slope," said Paul Stephens, director of policy and advocacy for the Privacy Rights Clearinghouse in San Diego. You "start out with something that may appear to be benign, but when you have the capability to do even more comprehensive tracking, there is a tendency to do that type of tracking over time," he said, suggesting that the data could be subpoenaed by courts, for instance.

Progressive says it does not use the data to resolve claims without first obtaining permission, and it will not sell "personally identifiable data to any third parties." However, the insurer said it will disclose data when "we're legally required ... such as in response to a subpoena in a civil lawsuit or by police when investigating the cause of an accident."

Mr. Hutchinson said: "Since we don't have GPS, all we can tell you is the car was on or off. We don't know who was driving it. We don't know where it was."

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