Travelers Canada ‘trying to figure out how best to proceed’ with telematics-based auto insurance

Travelers Canada is “very interested” in usage-based auto insurance using telematics, the company’s chief executive officer suggested Thursday, while Intact’s president said more than half of the new auto business it writes in Ontario comes with usage-based insurance (UBI).

During the CEO Panel at the Insurance Brokers Association of Ontario (IBAO)’s annual convention, panelists agreed that UBI helps influence driving behaviour, but the CEO of Economical Insurance suggested UBI will not solve the “cost problem” of Ontario auto insurance.

The panel, held at the Sheraton Centre in Toronto, was moderated this year by George Cooke, president of Martello Associates Consulting and former CEO of The Dominion of Canada General Insurance Company, which is now owned by The Travelers Companies Inc.

Cooke asked panelists for their view of the “disruptive nature” of UBI, which lets insurers monitor vehicle behaviour such as total distance travelled, sudden acceleration, time of day and hard braking.

“We are very interested in the product,” Travelers Canada CEO Duane Sanders said of usage-based auto insurance. Sanders was the firm’s chief operating officer until last month, when he replaced Brigid Murphy, who is now vice chairman.

“We are trying to figure out how best to proceed but I will also say we are certainly conscious of how regulation can somewhat stymie innovation and for us as an industry to take full advantage of what I think that product can ultimately offer, we’ve got a ways to go,” Sanders (pictured below) said.

His concerns about regulation were echoed by Karen Gavan (pictured above), president and CEO of Economical Insurance, which does not use UBI to set auto rates.

“One of my fundamental concerns is, the regulation of the product and the fact that for us – Ontario is our largest market – Ontario has regulated a discount-only model,” Gavan said during the panel. “So here we have to spend millions of dollars to put the systems in place to collect the data and put the devices in. But I can only give those customers a discount. So where do you think the cost goes? It gets borne by the system, so it doesn’t resolve our Ontario auto cost problem. Furthermore, much of our Ontario auto cost is related to propensity to abuse the system, which doesn’t get detected in a UBI device.”

Insurance carriers offering UBI in Canada include Unica Insurance Inc., The Co-operators Group Ltd., the South Central Ontario arm of the Canadian Automobile Association (CAA), Desjardins General Insurance Company (DGIG), Intact Insurance, Pilot Insurance Company and Industrial Alliance Home and Auto Insurance Inc.

Through its Mobiliz brand, Industrial Alliance provides auto insurance in Quebec and sets premiums based in part on driving behaviour. Industrial Alliance increases customers’ rates if risky behaviour – such as driving more than 18 kilometres per hour over the speed limit – is detected.

In Ontario, UBI is only offered under a discount-only model. However, surcharges are not actually prohibited in Ontario, said Bruce Green, senior manager of the rates and classifications unit at the Financial Services Commission of Ontario’s auto insurance division, during an interview with Canadian Underwriter in early 2014.

“To this day, I don’t think any insurers have come to us and filed a surcharge-driven model,” Green said at the time. But Green added, at the time, that an insurer wanting to use telematics data to apply surcharges “should have the actuarial support to show that certain patterns of bad driving behaviour will result in more accidents” and that “in the absence of support for a surcharge, an insurer might have some challenges in getting the regulator to approve it.”

One insurer offering discounts to Ontario auto customers using telematics is Levis, Quebec-based DGIG, under its Ajusto brand.

Auto customers want to pay premiums according to risk, DGIG president and CEO Sylvie Paquette suggested Thursday at the CEO Panel.

“We believe telematics will change the way we rate our customers,” she added.

Also on the CEO Panel was Jean-Francois Blais, president of Intact Insurance, a subsidiary of Toronto-based Intact Financial Corp., which announced its plans to offer UBI in 2014.

Initially, auto customers were “questioning how the data was being collected, where do you store the data, the privacy issue,” Blais said. “Today our experience is that more than 50% of the new business we write in Ontario is coming with UBI, meaning that people are open to sharing information.”

Blais (pictured right) added that auto policyholders “want to get the feedback and the dashboard and the information and they have a feeling that they have some control over their premiums, which is very reassuring.”

Over the “long term,” Blais added, “will car manufacturers have access to this data in the future and could they use it to provide some insurance coverages?”

Aviva Canada Inc.’s Pilot subsidiary offers UBI through Ingenie Canada Inc., both through brokers and direct to consumers on the Ingenie.ca website. Ingenie’s parent company, Quindell plc, has an agreement with IBAO subsidiary Independent Broker Resources Inc. (IBRI) to provide telematics in Ontario.

“We were out with UBI some years ago,” Aviva Canada president and CEO Greg Somerville said at the CEO Panel. He was alluding to Autograph, a UBI product Aviva launched in 2005.

“The technology at the time was not the technology that exists today,” Somerville (pictured below) added.

Aviva discontinued Autograph but announced at the 2014 IBAO Convention it was committing to the IBRI service.

“We embrace technology going forward that will allow people to actually influence their behaviour,” Somerville said Thursday. “If you have technology that can influence their behaviour and you start to reduce accidents and you can save lives, it becomes something that we get excited about.”

The fifth panelist was Rowan Saunders, president and CEO of RSA Canada.

RSA Canada’s senior vice president for personal lines, Donna Ince, told brokers last March that RSA Canada will “be launching telematics closer to the end of 2015.” She made that announcement during a presentation and reception in Toronto’s distillery district.

Then at Thursday’s CEO panel, Saunders suggested that in insurance, customers want to be treated as individuals.

“I think it’s been proven that it helps change people’s behaviour,” Saunders said of telematics.

But Gavan suggested that changes in behaviour are not necessarily tied to insurance rates.

In the future, Gavan predicted, vehicle owners will be able to have apps that let them “check the on-board cameras, know where it is, know who’s driven it, where it’s been parked.”

She added: “I’ll have all of that data at my disposal to manage my asset as a consumer, and I think you’ll see greater changes in behaviour in how they’ll drive a car, how they control their children driving a car, if they are empowered without it being tied to insurance.”

Gavan told brokers that commercial fleet managers do not necessarily use telematics to save money on insurance.

“It’s because of their optimization of their business operations,” Gavan said. “We tend to put insurance front and centre, but I saw a company implement it in all of their service vehicles from a safety concern. Well, the actual fact is, they have a 30% productivity improvement because their service vehicles were no longer parked at a donut shop for hours on end, because they were being tracked. The value to that company was way way greater than the insurance savings.”

More coverage of the IBAO Convention 2015

IBAO continues efforts to maintain restrictions on banks selling insurance

RIBO CEO, IBAO graduating CAIB class among those honoured at 2015 convention in Toronto