The Next Big Thing: Usage-Based Car Insurance (PGR) (ALL)
Tweet
Share
E-mail
Get Alerts PGR Hot Sheet
Price: $224.34 +4.08%
Overall Analyst Rating:
SELL (= Flat)
Dividend Yield: 0.2%
EPS Growth %: -16.1%
Overall Analyst Rating:
SELL (= Flat)
Dividend Yield: 0.2%
EPS Growth %: -16.1%
Join SI Premium – FREE
What if your car insurance rate was based on when and how much you drive? Well, this type of insurance is available now and appears to be the wave of the future.
Consumer awareness of usage-based car insurance is growing rapidly and companies like tried Progressive's (NYSE: PGR) "Snapshot" or Allstate's (NYSE: ALL) "DRIVEWISE" are at the forefront, according to a proprietary study from MKM Partner's Wendy Farina.
"Consumer awareness for usage-based car insurance programs is impressive for Snapshot from Progressive (more than half of all consumers surveyed have heard of Snapshot), less so for DRIVEWISE from Allstate (only 11% of all consumers surveyed were aware of DRIVEWISE)," Farina said in a report released Tuesday. "Given the stage of their rollout, Progressive is much further along in stimulating consumer interest in and propensity to switch to Progressive Insurance. Having said that, and despite the fact they more recently introduced DRIVEWISE, our research confirms healthy consumer interest in usage-based car insurance programs particularly driven by the potential for discounts but for other reasons as well."
For Progressive's SNAPSHOT, data showed that nearly 8% of SNAPSHOT aware consumers (or 3.9% of all consumers surveyed in targeted states) have installed the device to see if they were eligible for a Progressive discount. The chance to save up to a 30% was the key driver for initial trial, with 80% saying this was the driving factor. 36% of consumers aware of Snapshot are interested in learning more and may take a "test drive." More than half of those who have not yet switched to Progressive plan to in the future, results showed. 24% of aware consumers who have not yet tried Snapshot plan to in the future.
For Allstate's DRIVEWISE, more than 9% of all DRIVEWISE-aware consumers (note this represents less than 1% of all consumers surveyed) have tried DRIVEWISE heretofore, according to the data. While still very early in rolling out the program, but more than 42% of the small sample of consumers who have tried DRIVEWISE have already switched over to Allstate. Further, nearly 73% of those who have not yet switched plan to in the future. Finally, more than 34% of aware consumers who have not yet tried DRIVEWISE plan to in the future.
Data from the study suggests, "Progressive may be closer than some think to achieving meaningful policy growth," according to MKM Partners Insurance Industry analysts Harry Fong and Darren Marcus. The same may hold true for Allstate, though it may take longer as DRIVEWISE is only available in 16 states.
Usage-Based Insurance (UBI) is being lauded as "major step forward" and those that have developed the most sophisticated UBI capabilities will have a significant competitive advantage in the years ahead.
Right now Progressive is the clear industry leader in the UBI space today, with Allstate quickly catching up.
"Because of the cross licensing agreement between Progressive and Allstate on their respective UBI patents, these two companies have a meaningful head start on the rest of the industry," the analysts notes. "Progressive has licensed one additional company to use its technology for data gathering though it must wait until 2015 to use the information for pricing purposes. Progressive’s “Snapshot” was rolled out throughout most of the country over a year ago and has had good success in its direct channel but limited success in the independent agency channel. As a result, the company has re-worked its advertising effort to get more agency customers to try the product. We suspect Allstate's capabilities in UBI are equally as good as Progressive's, but it took longer to roll out DRIVEWISE. DRIVEWISE will likely be available countrywide within a year or so. It should be noted that every state has its own set of rules to govern UBI offerings. As an example, the most populous state in the country, California, only permits insurers to gather mileage data, at this point."
The firm has a Buy rating and $32 price target on Progressive and Buy rating and $60 price target on Allstate.
Consumer awareness of usage-based car insurance is growing rapidly and companies like tried Progressive's (NYSE: PGR) "Snapshot" or Allstate's (NYSE: ALL) "DRIVEWISE" are at the forefront, according to a proprietary study from MKM Partner's Wendy Farina.
"Consumer awareness for usage-based car insurance programs is impressive for Snapshot from Progressive (more than half of all consumers surveyed have heard of Snapshot), less so for DRIVEWISE from Allstate (only 11% of all consumers surveyed were aware of DRIVEWISE)," Farina said in a report released Tuesday. "Given the stage of their rollout, Progressive is much further along in stimulating consumer interest in and propensity to switch to Progressive Insurance. Having said that, and despite the fact they more recently introduced DRIVEWISE, our research confirms healthy consumer interest in usage-based car insurance programs particularly driven by the potential for discounts but for other reasons as well."
For Progressive's SNAPSHOT, data showed that nearly 8% of SNAPSHOT aware consumers (or 3.9% of all consumers surveyed in targeted states) have installed the device to see if they were eligible for a Progressive discount. The chance to save up to a 30% was the key driver for initial trial, with 80% saying this was the driving factor. 36% of consumers aware of Snapshot are interested in learning more and may take a "test drive." More than half of those who have not yet switched to Progressive plan to in the future, results showed. 24% of aware consumers who have not yet tried Snapshot plan to in the future.
For Allstate's DRIVEWISE, more than 9% of all DRIVEWISE-aware consumers (note this represents less than 1% of all consumers surveyed) have tried DRIVEWISE heretofore, according to the data. While still very early in rolling out the program, but more than 42% of the small sample of consumers who have tried DRIVEWISE have already switched over to Allstate. Further, nearly 73% of those who have not yet switched plan to in the future. Finally, more than 34% of aware consumers who have not yet tried DRIVEWISE plan to in the future.
Data from the study suggests, "Progressive may be closer than some think to achieving meaningful policy growth," according to MKM Partners Insurance Industry analysts Harry Fong and Darren Marcus. The same may hold true for Allstate, though it may take longer as DRIVEWISE is only available in 16 states.
Usage-Based Insurance (UBI) is being lauded as "major step forward" and those that have developed the most sophisticated UBI capabilities will have a significant competitive advantage in the years ahead.
Right now Progressive is the clear industry leader in the UBI space today, with Allstate quickly catching up.
"Because of the cross licensing agreement between Progressive and Allstate on their respective UBI patents, these two companies have a meaningful head start on the rest of the industry," the analysts notes. "Progressive has licensed one additional company to use its technology for data gathering though it must wait until 2015 to use the information for pricing purposes. Progressive’s “Snapshot” was rolled out throughout most of the country over a year ago and has had good success in its direct channel but limited success in the independent agency channel. As a result, the company has re-worked its advertising effort to get more agency customers to try the product. We suspect Allstate's capabilities in UBI are equally as good as Progressive's, but it took longer to roll out DRIVEWISE. DRIVEWISE will likely be available countrywide within a year or so. It should be noted that every state has its own set of rules to govern UBI offerings. As an example, the most populous state in the country, California, only permits insurers to gather mileage data, at this point."
The firm has a Buy rating and $32 price target on Progressive and Buy rating and $60 price target on Allstate.
Serious News for Serious Traders! Try StreetInsider.com Premium Free!
You May Also Be Interested In
- Pay attention to this oil stock that offers 12.5% FCF yields in 2026/27: BofA
- BofA is increasingly bullish on these 2 EU chip stocks
- Bernstein says this EU pharma name is now a sustainable growth stock
Create E-mail Alert Related Categories
Insiders' BlogSign up for StreetInsider Free!
Receive full access to all new and archived articles, unlimited portfolio tracking, e-mail alerts, custom newswires and RSS feeds - and more!
