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Flo from Progressive InsuranceShe’s everywhere, she’s everywhere. You can’t watch any TV shows or open any magazine without seeing the image of Flo: the fictional character that appears in commercials for Progressive Insurance. Flo is played by the actress/comedienne Stephanie Courtney. This fictional character has her own entry in Wikipedia, a fan base on Facebook, and her own line of line of clothing. She’s the face for Progressive, advertising reduced insurance rates based on a simple premise: if you agree to install a mini “black box” in your car to track and report your driving habits, you will be charged rates based on your individual (presumably good) driving habits. Intuitively, this makes sense. After all (you say to yourself) why should I, a good driver, be charged a rate that is inflated to help cover the costs of bad drivers. In a way, it’s like renting insurance by the mile. For those of us who live in smaller towns, drive a limited number of miles, and are all around “good citizens”, why should we pay more than necessary for our insurance?

Automobile insurance rates are affected by location, number of miles driven per year, driver age and gender, type of automobile driven, and other factors such as prior driving record. For example, the accident rate for males age 19 years or younger is nearly twice that of those between 20 and 30 years old. On a per-mile basis, the accident rates for older people are higher than those for middle-aged drivers. Another example is the effect of location as a risk factor for theft. The rate of car theft in Fresno, California, (the highest theft rate city) compared to Blockton, Iowa, (where I was born) is very different. In Blockton, Iowa, your hot new car won’t be stolen – but the 25 residents will come out to stare at it!

In order to be profitable, insurance companies have sought to develop accurate, statistically based estimates of risk factors and have developed prices in accordance with the associated risk. This is complicated by several factors. First, insurance rates are governed by complex regulations at the state and national levels. Second, insurance companies seek to be price competitive while still maintaining a profit. Third, it is complicated by the historical practice of spreading the costs of high risk groups and factors partially to the rest of the insured population. The emerging idea advertised by Progressive is the concept of personalized insurance for your vehicle – you pay based on your actual, individual behavior as observed by in-place sensors and a data processing system.

Some object to such monitoring, citing it as yet another invasion of privacy. It should be noted, however, that virtually every new car has an event data recorder (EDR) or “black box” the size of a pack of cards that records driving habits, seatbelt use, deployment of air bags, and other observables. When an air bag deploys, the EDR records data before, during, and after a crash, analogous to how a black box on an airliner works. The federal government recently mandated that all new cars sold in the United States be equipped with EDRs. The data collected by EDRs can be accessed by police authorities without your permission. In effect, you do not own the black box or the data collected by it, even though it resides in your automobile. Information technology including GPS, advanced sensors, local computers, and wireless communications provides the capability to know where you’ve been with your automobile and how you’re driving it.

What are the logical implications of personalized insurance? Will automobile insurance companies install a “risk meter” in your vehicle to allow you to see the minute-by-minute risk? Would this impact your driving behavior, analogous to the effect when driving cars such as the Prius, which shows your dynamic mileage? Will your GPS display have an “insurance” overlay that indicates areas of high risk? Will insurance be based on individual drivers, requiring biometric confirmation of the driver for each trip? Will insurance companies go so far as to measure individual cognitive function – perhaps requiring a driver to solve a puzzle prior to turning on the key? Or will each driver be required to wear biometric monitors to determine factors such as their level of fatigue and alertness? As farfetched as these ideas may seem, rapid changes in sensing, computing, and communications technology make all of these easy to implement. It may be a matter of time before they become routine.

In the meantime, I need to practice my cognitive puzzle solving skills – I need the car tonight and I’m not sure it will start unless I’m sharp!

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