Progressive’s UBI licensing plans leave questions: report

Progressive Insurance’s plans to licence its intellectual property on usage based insurance in the U.S. are a good step forward, but still leaves several unanswered questions for competitors, notes a new report from Strategy Meets Action (SMA).

The insurance giant announced its licensing terms in December 2012, with applications under those terms open through the end of this June. As of last December, Progressive owned six UBI patents in the U.S., with its application of UBI accounting for more than $1 billion in premiums.

“One of the most important points in the announcement is that Progressive’s current offer of terms is available only to companies that apply through June of 2013,” Richard Welch, an SMA telematics expert, commented in a statement on the report.

That leaves the question of whether licensing pricing and terms could change, the report suggests. The current fee set out by Progressive is 0.02% of direct written premium, which isn’t too onerous, the report notes.

“The price appears attractive and removes the ambiguity associated with challenging Progressive’s intellectual property rights,” Welch noted.

But Progressive’s plans don’t allow companies to rate policies based on driving habits until April 1, 2015, and the company hasn’t made clear what insurers can do in the meantime to attract customers to their UBI programs, the report says.

Patent issues are still a barrier to more insurers using UBI for auto insurance pricing, as many companies want to avoid lawsuits, SMA has noted.

Still, with its licensing plans announced, SMA says an acceleration of activity in bringing UBI programs to market will occur.

Editor’s Note: An earlier version of this article incorrectly stated that the fee under Progressive’s licensing terms was 0.05% of direct written premium. The fee under current terms is 0.02% of direct written premium. Canadian Underwriter regrets the error.