When Flo the insurance lady met RISD

July 13, 2012, 2:15 PM UTC

By Omar Akhtar, contributor

FORTUNE — When students at the Rhode Island School of Design were asked to collaborate with an unlikely corporate partner—car insurer Progressive Corp. (PGR)—they went for the jugular.

This week Progressive announced an expansion of its Snapshot program, which offers drivers discounts based on usage—usage Progressive tracks via a device that plugs into consumers’ cars. (More on Snapshot in a moment.) Drivers could be eligible for up to 30 percent off their auto-insurance payments.

Four years ago the insurance company contacted RISD to help it create a sleeker, sexier-looking gadget. Earlier versions of the device, quips Progressive CEO Glenn Renwick, “looked like they were, well, designed by an insurance company.”

The students’ inspiration? A ladybug, which, it turns out, is the nemesis of the gecko. And a gecko happens to be one of the mascots of Progressive rival GEICO. “As it turns out, if a gecko eats a ladybug it dies,” says Leslie Fontana, a professor of industrial design who taught the 75 sophomores assigned to the project.

Progressive executives ultimately decided not to be so literal (one prototype was painted red with black spots) but they did like the rounded shape and more user-friendly vibe of the students’ basic design and concept. “They took something slightly imposing and made it playful and accessible,” says Richard Hutchinson, general manager of usage-based insurance at Progressive.

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The Snapshot, a D-shaped device that is roughly half the size of a computer mouse, plugs into the onboard data port beneath the car’s steering wheel. From here, it transmits data for three key indicators that Progressive will use to determine a driver’s potential discount. They are the time of day the car is driven (some hours in the day are more risky than others), how many hard brakes per mile the driver makes and how much distance the car travels (the longer you’re on the road, the greater risk of an accident).

The Snapshot gathers and transmits data in real-time which can be monitored online by the user. At the end of an evaluation period, Progressive scores the data and awards the discount, using state averages and internal calculations. Customers will not receive increased rates if they score lower, they will be simply be given the same rate they were quoted at the start of the trial.

Progressive maintains that Snapshot will not take into account driving speeds and it doesn’t have GPS capability. “We don’t think speed is that predictive of driving behavior, especially when we don’t have a GPS locator,” Hutchinson says. “It is also a touchy subject with our customers. They don’t want a speed cop sitting in their car.”

Progressive is so confident in the device’s capability, they’re encouraging drivers who aren’t already signed up with them to take part in the program. Potential customers can take a free test drive of the Snapshot for 30 days and then bring it back to see the kind of discounts they would qualify for.