Back in December, Progressive Insurance announced a licensing program for the carrier's intellectual property related to usage-based car insurance programs that will begin in 2015. As a follow-up to that announcement, Tom Hollyer, Progressive's national product development leader, addressed several issues about Progressive's licensing plans via email.

Progressive began development of its usage-based insurance program over 15 years ago and Hollyer points out that during that time the product has changed dramatically.

"We've poured years of research into advancing and refining our technology," he says. "We brought Snapshot to the mass market in 2011 and it's the industry leader in UBI, accounting for over $1 billion in premiums written." Snapshot is available in 43 states, adds Hollyer.

Because Progressive has invested so many resources into the product along the way, the insurer has taken measures to protect its intellectual property by securing six patents. These patents allow Progressive to take advantage of the company's innovation and the reward that comes with being first to market, points out Hollyer.

"We've always said that we'd be willing to license this technology down the road," he says. "This is the type of innovation and intellectual property that will dramatically shift how consumers think about insurance. We believe the right time to make the technology available to others in the marketplace is 2015."

Hollyer makes it clear that Progressive is not licensing its software, algorithms or technology.

"What we are licensing is the right to offer a UBI program without infringing on our patents," he says. "We expect that a range of carriers—big and small—will be interested in licensing agreements. We also feel that there will be widespread consumer demand for UBI. We've heard for years from our customers that good drivers deserve to pay less for their insurance."

Progressive's Snapshot UBI program gives drivers an opportunity to earn a discount based on their safe driving habits, explains Hollyer.

"Customers that earn a discount are happy; retaining their policy for longer periods of time," he says. "That's a win for insurance carriers and agents. In addition to retention, we've heard from our agents that Snapshot is a great new business driver and source of referrals."

The licensing fees Progressive intends to charge are dependent on written premium, explains Hollyer.

"The calculation for the fee structure is an annual royalty payment equal to licensee's countrywide private passenger auto insurance direct written premiums for the most recently reported year, multiplied by two basis points (0.02 percent)," he says.

Hollyer points out additional terms of the agreement include:

Commences the date license is executed through April 2022
Waiting Period: Licensees will not rate insurance based on its customers' driving habits prior to April 1, 2015
Progressive also has the right to licensor recognition
Application for licensing under these terms is open through June 2013, with payments commencing with usage on or after April, 2015.

Special Reports /

UBI Intellectual Property—Not Software—to be Licensed by Progressive

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