How UBI could empower your client

Usage-based insurance (UBI) empowers the customer and takes a lot of the complexity out of the insurance product, a speaker said Wednesday during KPMG’s 30th annual insurance conference. 

“Personally, I love the idea of usage-based insurance and telematics,” Celyeste Power, chief strategy officer with Insurance Bureau of Canada, said during the Reimagining Customer Experience panel at the conference. “It takes a complex product that has a number of factors that drives your insurance premium and how your insurance premium is calculated, [and] it takes a lot of that away.

“And it’s really about how do you drive? What is your driving behaviour? How often are you driving or stopping… and really puts you in charge of how much you’re going to pay for your premium. I think it’s just going to be a really interesting, good consumer experience.” 

In addition, regulatory burdens to UBI are shifting, Power said. “For a long time in Canada, there were a lot of regulatory barriers in place that made it difficult for us to bring interesting technologies like telematics into place,” she said. “We’re seeing some change there. We’re not where most of the U.S. states are. But we’ve seen some change in Alberta and Ontario, and I’m hopeful that we see it across the country so that we can bring on more of those telematics products.” 

In private auto, UBI allows insurers to “attract some better risk” and, accordingly, a better loss ratio, said Eric Herbelin, president and CEO of Manitoba Public Insurance (MPI). “So, it’s not so much what the technology does maybe, but more the risk connection.” 

From a public auto perspective, UBI needs to be leveraged somewhat differently, he said. “For us, since we insure 100% of people driving in Manitoba, if we start reducing the rates for the best drivers, we would have to increase the rates for the other drivers in absolute terms if the driving behaviour and the number of accidents is not changing,” Herbelin said.  

The key is using UBI in a way that helps actual loss costs and makes road safer. “And I don’t know that the industry in the U.S. and Canada or other parts of the world really has found the secret sauce here,” Herbelin said.  

MPI is currently “exploring some options and challenges for the future” as it relates to UBI, Herbelin reported. “So, different types of risk groups. 

“The closest to us may be a small risk group that is experiencing a high number of losses and with that suffers a bit from higher premiums on average, and where we might find ways through data to better understand driving behaviours or elements [and] factors that are driving those losses,” he said. “And by understanding those patterns, [we can find] ways to eventually reduce total cost of loss.” 

Feature image by iStock.com/mysticenergy