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Progressive Insurance Co., which in 2008 debuted its black-box auto insurance program in Alabama, is about to implement some changes, including one that might seem counterintuitive.

The voluntary "MyRate" program allowed customers to install a small device that records data reflecting how they drive -- similar to the black box on an airplane. Via a cell connection the device sends the information to Progressive, which in the past has used the data to give discounts to good drivers and levy surcharges on bad ones. Beginning Friday, the company will end the bad-driver surcharges but continue to offer the discounts under a rebranded program called "Snapshot."

Richard Hutchinson, general manager of usage-based insurance for the Ohio company, said that about one in four of Progressive's Alabama customers opted to try the program since its 2008 rollout. A majority earned discounts that averaged between 10 and 15 percent.

So Progressive is spending money to manage the program, and now will see participants' premiums remain flat or go down -- never up -- as a result. How can it make money like that?

Snapshot will help Progressive lure away from its competitors good drivers, who file fewer claims, Hutchinson said. Progressive also hopes to increase its retention rate and win new business in general by word-of-mouth.

"When you do good things for people, or they perceive that you're trying hard, they talk about you," Hutchinson said.

The company tinkered with the voluntary program in part in response to privacy concerns expressed by customers who were uncomfortable with the idea of Big Brother monitoring their driving, Hutchinson said. In addition to eliminating the threat of higher rates, the company also is now removing the devices after six months. That's long enough to determine whether someone is a good driver, he said.

The devices record the time of day a car is in use, miles driven and braking patterns. They do not include GPS technology.

Courtesy:  al.com

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