Progressive to begin penalising bad drivers

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Telematics has been something insurance firms have been rather excited about for a while now. Thanks to its tracking abilities, it allows them to more accurately estimate how safe a driver is likely to be and therefore their chances of making a claim. On top of that, it lets companies limit their exposure to bad drivers, even if those drivers are already customers.

That aspect of insurance telematics isn’t often talked about however, with companies preferring to extol the virtues of the carrot, rather than threaten with the stick. However now US insurer Progressive is bucking that trend, after it was announced during its recent earnings report that it had plans to begin incentivising drivers to behave more safely on the road, by punishing those that drive badly.

“In recent years, we have employed a ‘discount only’ model for usage-based rating,” it reads (via Forbes).  In our latest model, introduced in one state in December 2014, we are affording more customers discounts for their good driving behaviour, while offsetting with surcharges for a small segment of drivers.”

progressive

So what will this mean for drivers that put their foot down a bit too often and don’t rank highly in Progressive’s frame of mind when it comes to safe driving? As it stands, nothing much until renewal, though at that time, drivers can expect to pay upwards of 10 per cent more for the next year if they renew.

This seems like a strange strategy though, since renewal price is perhaps the most oft taken into consideration by drivers when it comes to choosing their insurer. On top of that, organisations can’t share telematics data with each other as it stands, so penalising unsafe drivers but only at the end of the year when you’ve already insured them for a year seems rather wasteful. Other organisations already employ penalties for young drivers that fail to drive safely: they stop insuring them. That’s a much stronger inventive.

Research also seems to suggest that the introduction of discounts, extra mileage and other benefits for driving safely are much more likely to result in an improvement in driver safety versus penalties when they don’t. What this may actually be indicative of, is Progressive attempting to get rid of its less than safe drivers, by discouraging them from renewing – and then if they do, the company has a bit of extra money to play with in-case something goes wrong.

That’s almost edging into conspiracy theory territory so we’ll stop there, but it does seem like a somewhat strange move from Progressive.

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Jon Martindale is an English author and journalist, who's written for a number of high-profile technology news outlets, covering everything from the latest hardware and software releases, to hacking scandals and online activism.