Progressive Patents for Usage-Based Insurance

Abstract

The material in this case presents Progressive Insurance as it faced important decisions regarding how to proceed with its usage-based insurance (UBI) initiatives, including the Snapshot device and related patents. Progressive had a head start on its competitors employing UBI pricing, but several competing insurance companies had been testing the waters with their own UBI products. In the case, Progressive considers a number of alternative uses of its patents for students to address. Excerpt UVA-OM-1578 Rev. Oct. 28, 2020 Progressive Patents for Usage-Based Insurance In 2012, Progressive Insurance (Progressive) was the fourth-largest auto insurer in the United States and held 8% market share. At the time, the company faced important decisions regarding how to proceed with its usage-based insurance (UBI) initiatives, including the Snapshot device. In the auto insurance industry, companies competed to identify, classify, and attract drivers by offering a wide array of coverage and discounts. Better drivers were those who required insurers to pay out less in claims (i.e., had fewer and/or less severe accidents), costing insurance providers less than worse drivers. As a result, better drivers were highly prized customers. When pricing insurance policies for customers, insurers were met with a difficult trade-off. Overpricing products made a firm uncompetitive in the marketplace, and competitors could underbid it. Underpricing led to unprofitability as claims costs exceeded the premiums (price) paid to the insurer. Consequently, accurately pricing policies created competitive advantage in the auto insurance industry. . . .