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CEO: Progressive Will Extend Pay-as-You-Drive Nationally

BESTWIRE

MAYFIELD VILLAGE, OHIO --  Progressive Corp. will expand its pay-as-you drive program nationally and launch a new advertising campaign to promote the program in the next 60 to 90 days, Chief Executive Officer Glenn M. Renwick said.

With the Snapshot program, Progressive says drivers can save up to 30% on automobile insurance. A small device is plugged into a diagnostic port of an insured's car, and the device records and sends data, including speed and time of day the car is being driven, back to the company. After 30 days, customers find out if they are eligible for a discount, based on their driving habits. After six months, Progressive determines the renewal discount, and the customers return the devices to the insurer.

"This is the product that we've been dealing with some period of time, so you can assume from that that we're taking a fair amount of diligence to make sure that we get what we think are the critical elements right, and by the mere fact that we're saying we're ready to approach national rollout and advertising, you can infer from that that we're at a level of comfort that is greater than we have ever been before," Renwick said in a conference call with analysts.

Under the program, safe drivers and those who drive less are more likely to receive a discount. The Snapshot program already is in use in 32 states, including Florida, Texas, Michigan, New York, New Jersey, Arizona, Ohio, and most recently, Louisiana, Kentucky and Maine.

Renwick said the ad campaign will feature a new series of commercials with both the character Flo, the perky clerk, and the character of Messenger, the customer-turned-Progressive advocate thanks to Flo, as well as some additional advertising for Snapshot, including ads featuring consumers.

Ad spending is expected to be "up slightly" from last year, Renwick said, adding "we calibrate our spend relative to yield," and "we're not going to lose discipline."

Progressive also is thinking about the implications of the new ad channel of mobile devices, Renwick said.

"We like to think of it as not just sort of making mobile a smaller Internet application," Renwick said. "It really is about what does mobile allow you to do that other forms or interactions with the consumer could not allow you to do, and I suspect that will be a whole new battlefield and a really exciting one for the next several years."

Consumer and privacy-rights groups in the past have spoken against the tracking of data including mileage, speed, acceleration, location and time of day.

"Insurers back this plan because it will get their spyware into Californians' cars, while doing nothing to make them more closely tie insurance rates to how far a motorist drives," Carmen Balber of Consumer Watchdog said in a statement.

Insurers have demonstrated that pay-as-you-drive plans are actuarially sound, said David Snyder, vice president and assistant general counsel for the American Insurance Association (BestWire, Aug. 8, 2008).

Most members of the Progressive Insurance Group currently have a Best's Financial Strength Rating of A+ (Superior).

In afternoon trading on March 7, shares of Progressive Corp. (NYSE: PGR) were trading at $20.73, down 0.72% from the previous close.