The Progressive Corporation (NYSE:PGR) Q4 2022 Earnings Call Transcript

Jim Haas: So, on the first part of your question in terms of how — what are the traditional variables and what it informs, the whole point of UBI that is incremental to all of that. So, if we could have seen that these variables without UBI, we’re inaccurate, we would have fixed it. UBI gives us new information about that customer that the traditional variables tend to let you segment further, not just live in the ZIP code or they have this credit score. But this person within that is different than the other person that otherwise looks the same. So, that’s the point, it’s improving the segmentation. In terms of the surcharge, the discount we give is a participation discount, which is just for signing up. And so, if they move from the discount surcharge, it’s simply because we’ve then gotten that driving data and continuous model, theoretically, people could move from one to the other.

But in terms of why someone will get a surcharge, our model, as we kind of share on the website, it uses things like hard braking, how much you drive, when you drive variables like that. So folks who tend to get a surcharge drive more and drive — have more hard brakes. This is a sign of how aggressively they’re driving. Those are typically some of the variables that figure into that.

Ryan Tunis: Got it. And just I guess following up, so I hear you it’s incremental. But what about just in terms of conclusion, is it usually — can you say anything about those who get 40% tend to largely be much more preferred or those who get kind of in the 40% discount tend to be more mixed or tend to be a little bit more on — a little bit less standard?

Jim Haas: I think the UBI is kind of showing us it’s incremental to all of that. So the — intentionally, we don’t want it to look that way. We want it to be — if we knew the preferred customers were more likely to get the discount, we’d just give them a bigger discount in the first place. So, we try to use UBI to kind of sort out this preferred customer deserves an even bigger discount. This other preferred customer deserves maybe a surcharge. So, it’s really — it’s segmenting beyond what we already have.

Doug Constantine: We’ve exhausted our scheduled time. And so that concludes our event. Stacy, I will hand the call back over to you for closing scripts.

Operator: That concludes the Progressive Corporation’s fourth quarter investor event. Information about a replay of the event will be available on the Investor Relations section of Progressive’s website for the next year. You may now disconnect.