Progressive, USAA Enter License Agreement for Usage-Based Insurance

Progressive Insurance announced Friday that it is entering into a licensing agreement with United Services Automobile Association for intellectual property related to usage-based car insurance programs, with USAA agreeing to a small portion—0.02 percent—of annual auto premiums in return.

The USAA deal announcement follows a December 2012 announcement from Progressive, which said that the Mayfield Village, Ohio-based auto insurance would make its intellectual property for user-based insurance (UBI) programs available to other carriers, subject to the following terms:

• Term of Agreement: 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
• Licensing Fee: 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)
• Progressive also has the right to licensor recognition

Progressive said that it leads the industry with six UBI patents in the United States and more than one million users to date.

Progressive’s current implementation of UBI, known as Snapshot, accounts for more than $1 billion in premiums and is currently available in 44 states and the District of Columbia, the company said.

“We have found that key driving behaviors predict the likelihood of a claim far better than traditional insurance rating variables alone,” said John Sauerland, Progressive Personal Lines Group President, in the statement about the USAA deal. “As insurers realize the benefits UBI offers consumers, it’s critical they deliver programs that reflect responsible intellectual property practices, which includes licensing the appropriate IP.”

Source: Progressive Insurance