Management

Pay-as-You-Drive Insurance: Big Brother Needs a Makeover


Progressive's Snapshot device monitors your behavior behind the wheel.

Courtesy Progressive

Progressive's Snapshot device monitors your behavior behind the wheel.

How do you get your customers to behave? It may not be by watching our every move and then squirreling away the data.

For auto insurance providers, the current method calls for a monitor in your car to collect data on your actual behavior behind the wheel so you can earn a discount for safer driving. That’s the approach championed by the Progressive Insurance Snapshot program. Other insurers are now following suit with their own pay-as-you-drive products, including Allstate and State Farm.

Progressive and others are still missing the big opportunity here. For the proud few who qualify as safe drivers, these companies will essentially acknowledge that they’ve been charging you too much for insurance and share some of the readjustment savings with you.

Our prediction is that these services, in their current form, won’t move the needle much. The safe drivers among us will keep driving safely; they’ll just pay less to do so. And the unsafe will balk. The drivers who are hardest to insure and could benefit most from observation—those of us who are less experienced, for example—are also most likely to reject the idea of a third eye in our rolling freedom machines.

Here’s something that might change the game: Don’t pay us off for the invasion of privacy; charge us extra for the privilege. Turn pay-as-you-drive into a premium service with the revolutionary promise of making us better drivers. What if the industry began to compete shamelessly at helping us prevent mistakes? How would the design of insurance services change?

For one, pay-as-you-drive might look somewhat different. Rather than targeting the road’s safest drivers, insurers might focus instead on making the service invaluable to the rest of us. They might give us access to sophisticated in-car analytics, so we could learn the real risks we’re taking when we glance at our phones or break too hard. Maybe we’d get highly customized advice about how to get to our favorite places faster or more efficiently. Forget generic PSAs about road safety. Show us precisely how stupid our own choices are.

Even more compelling, show us how to turn our teenagers or aging parents into better drivers. Many of us white-knuckle it every time a loved one gets in the car. How much would we be willing to pay if someone could truly make them safer behind the wheel?

Pay-as-you-drive services are an exciting innovation, but their impact will be incremental unless we change the frame around them. Instead of thinking about the technology as a way to reduce the cost of insurance, we should be thinking—with great audacity—about how we can use it to create unprecedented value.

Don’t give us a discount for the hard truth about our driving. Make that truth so useful to us that we’re willing to pay extra for it. In other words, give us a really great reason to let you come along for the ride.

Frances Frei is a Professor at Harvard Business School. Anne Morriss is the Founder and Chief Knowledge Officer at Concire Leadership Institute. They write about consumer behavior in their new book Uncommon Service: How to Win by Putting Customers at the Core of Your Business.

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