{"id":2817,"date":"2015-11-22T23:53:20","date_gmt":"2015-11-23T04:53:20","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-digit\/submission\/flo-is-hungry-for-your-driving-data\/"},"modified":"2015-11-22T23:59:53","modified_gmt":"2015-11-23T04:59:53","slug":"flo-is-hungry-for-your-driving-data","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-digit\/submission\/flo-is-hungry-for-your-driving-data\/","title":{"rendered":"Flo Is Hungry for Your Driving Data"},"content":{"rendered":"<p>With the launch of its Snapshot driving tracking program in 2008, Progressive, an insurance company, has become a pioneer in the fast-growing segment called telematics and has since relied on data analytics to gain advantage over its competitors. The term telematics essentially refers to \u201ca range of different features, options and devices that are brought together by a single principle \u2013 data and communication.\u201d<\/p>\n<p><strong>How Progressive\u2019s Snapshot works<\/strong><\/p>\n<p>It all starts with a small driving tracker device called Snapshot that Progressive has been distributing to its car insurance customers since 2008. You plug the device into your car\u2019s onboard diagnostic port. Snapshot collects data at one second intervals and at the end of every trip, sends the collected driving data to Progressive via AT&amp;T\u2019s wireless network. Customers need to opt-in to begin participating in the program.<\/p>\n<p><a href=\"http:\/\/19squx2sqzlk2w3lh726rs88.wpengine.netdna-cdn.com\/wp-content\/uploads\/2015\/11\/snapshot1.png\"><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-2816\" src=\"http:\/\/19squx2sqzlk2w3lh726rs88.wpengine.netdna-cdn.com\/wp-content\/uploads\/2015\/11\/snapshot1.png\" alt=\"snapshot\" width=\"435\" height=\"288\" srcset=\"https:\/\/d3.harvard.edu\/platform-digit\/wp-content\/uploads\/sites\/2\/2015\/11\/snapshot1.png 609w, https:\/\/d3.harvard.edu\/platform-digit\/wp-content\/uploads\/sites\/2\/2015\/11\/snapshot1-300x199.png 300w, https:\/\/d3.harvard.edu\/platform-digit\/wp-content\/uploads\/sites\/2\/2015\/11\/snapshot1-600x397.png 600w\" sizes=\"auto, (max-width: 435px) 100vw, 435px\" \/><\/a><\/p>\n<p>This video provides more color on the Snapshot program:\u00a0<a href=\"https:\/\/www.youtube.com\/watch?v=kddVgOvPQMY\">https:\/\/www.youtube.com\/watch?v=kddVgOvPQMY<\/a><\/p>\n<p><strong>Data as a value creation tool <\/strong><\/p>\n<p>The core value that Progressive creates for its customers is essentially a peace of mind in case of an occurrence of a qualified event. The problem is that the core value creation model is similar across competitors. Therefore, to be the winner, a company needs to find an effective differentiation strategy, for instance through a marketing strategy or use of technology. Through the collection and analysis of data, Progressive can enhance its customer value creation capabilities in a variety of ways:<\/p>\n<ul>\n<li>Through a better understanding of customer demographics as well as customers\u2019 needs and driving behavior Progressive can optimize and tailor their product suite.<\/li>\n<li>Customer data analytics interface offers a wide range of insights into customers\u2019 driving behavior. It alerts customers to hazardous driving thus promoting safer driving habits.<\/li>\n<li>A customer\u2019s consistent, good driving record is a tool in obtaining better insurance rates.<\/li>\n<\/ul>\n<p>Needless to say, data analytics creates significant value for Progressive itself:<\/p>\n<ul>\n<li>Data analytics offers a powerful risk management tool for the company. Insights into customers\u2019 driving habits, and more broadly risk tolerance, help Progressive predict who carries more risk.<\/li>\n<li>Self-selection: Not signing up for Snapshot is a signal that a customer might not perceive its driving as safe.<\/li>\n<li>Data analysis improves customer segmentation and pricing strategy.<\/li>\n<\/ul>\n<p><strong>Progressive\u2019s value capture model<\/strong><\/p>\n<p>Progressive rewards those who sign up for Snapshot with a promise of a 30% discount on their car insurance. The idea behind the concept is simple: the better the driving, the less risky the customer is and deserves cost savings.<\/p>\n<p>It appears though that Progressive itself also captures many benefits of the program. First of all, it can better optimize its pricing strategy and create more accurate risk management system. Second, by promoting safe driving habits it reinforces an image of a safety conscious company. Third, customer data make for a more effective marketing strategy. \u00a0Finally, there is also a question of whether Progressive would consider selling the data to third parties. For now, the insurer has no intention to do that.<\/p>\n<p><strong>Developing data-driven operating model<\/strong><\/p>\n<p>From the Snapshot program, Progressive collects two main data elements: time and speed. It feeds the speed readings into algorithms to calculate events, such as hard braking. Driving tracking is just one of many different initiatives at Progressive that utilizes a deep technical team and advanced capabilities around data analytics. As an example, Progressive&#8217;s tools for harnessing big data range from version 2.4.1 of Hadoop, R and the full spectrum of SAS software to Excel.<\/p>\n<p><a href=\"http:\/\/19squx2sqzlk2w3lh726rs88.wpengine.netdna-cdn.com\/wp-content\/uploads\/2015\/11\/chart1.png\"><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-2815\" src=\"http:\/\/19squx2sqzlk2w3lh726rs88.wpengine.netdna-cdn.com\/wp-content\/uploads\/2015\/11\/chart1.png\" alt=\"chart\" width=\"418\" height=\"556\" srcset=\"https:\/\/d3.harvard.edu\/platform-digit\/wp-content\/uploads\/sites\/2\/2015\/11\/chart1.png 550w, https:\/\/d3.harvard.edu\/platform-digit\/wp-content\/uploads\/sites\/2\/2015\/11\/chart1-226x300.png 226w, https:\/\/d3.harvard.edu\/platform-digit\/wp-content\/uploads\/sites\/2\/2015\/11\/chart1-451x600.png 451w\" sizes=\"auto, (max-width: 418px) 100vw, 418px\" \/><\/a><\/p>\n<p style=\"text-align: center\">Examples of Snapshot reports<\/p>\n<p>Advanced data analytics capabilities allow Progressive to get ahead of other players in the highly competitive insurance industry. Data analytics-based approach to product development and advertising strategy creates more targeted products and allows for a more efficient use of resources. Driving analytics is just one of many initiatives. As an example, Progressive deploys open-source data analytics software to optimize its ad strategy to gain new customers. Quite unexpectedly for an insurance company, Progressive even launched <em>Innovation Garage<\/em>, a lab that promotes development of new technology solutions.<\/p>\n<p><strong>Current position and challenges ahead<\/strong><\/p>\n<p>Progressive exhibited early commitment to data analytics, which can be attributed to the vision of the insurer\u2019s executive team. Progressive CIO Ray Voelker said: \u201c(\u2026) we have expanded into big data, and Snapshot helped us with that. (\u2026) as the technology has emerged over the last four or five years, we certainly didn\u2019t wait for the integration between traditional and big data to emerge before we jumped into the big data (\u2026).\u201d<\/p>\n<p>This is not to say that competitors like Geico or Allstate are not acting on this opportunity. Besides competition, there is a threat that data will become commoditize. There are also obvious privacy concerns and threat of regulation. Despite these challenges, the telematics industry is projected to reach $15B by 2020 and Progressive is well position to benefit from its robust data analytics capabilities. Being the first mover, created a long-term competitive advantage for Progressive. Early start on data collection resulted in a database of more than 10 billion miles of driving data, which cannot be easily replicated.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>More than 10 billion miles of driving data collected by Progressive since 2008<\/p>\n","protected":false},"author":136,"featured_media":2836,"comment_status":"open","ping_status":"closed","template":"","categories":[776,894],"class_list":["post-2817","hck-submission","type-hck-submission","status-publish","has-post-thumbnail","hentry","category-data-analytics","category-insurance"],"connected_submission_link":"https:\/\/d3.harvard.edu\/platform-digit\/assignment\/data-driven-value-creation-value-capture-and-operating-models\/","yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.2 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Flo Is Hungry for Your Driving Data - Digital Innovation and Transformation<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/d3.harvard.edu\/platform-digit\/submission\/flo-is-hungry-for-your-driving-data\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Flo Is Hungry for Your Driving Data - 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