Use it or Lose it

Insurers in Alberta’s auto space may want to use it – the ever-intoxicating “it” being usage-based insurance (UBI) – but the provincial regulator makes clear they will not get to play until sobering matters are addressed.

UBI offerings are starting to roll out or expand in Canada, and one should only expect these to ramp up in the not-too-distant future.

Seemingly giddy over the possibilities, a number of players have entered the space to date. Over the last year or so, entrants have included the following: The Co-operators program, launched in Ontario in April, in which users get a 5% discount upon enrolment and could earn up to 25% off auto insurance, depending on driving behaviour; Desjardins General Insurance Group’s program, available in Ontario and Quebec as of last spring, allows individuals to save as much as 25% more on their car insurance at renewal; and Intact Financial is expected to soon release a program in both Ontario and Quebec.

All of these follow the policy from Industrial Alliance, Insurance and Financial Services Inc. in Quebec two springs ago and last year’s announcement that Quindell Portfolio PLC would partner with Independent Broker Resources Inc. to offer technology for all Insurance Brokers Association of Ontario telematics initiatives to IBAO’s 12,000 brokers.

But before insurers get to play in Wild Rose Country, they will need to ensure the issue of “informed consent” from consumers is addressed for any telematics-based insurance in the province.

Alberta’s Automobile Insurance Rate Board is supportive of UBI as a voluntary discount program, notes the board’s 2013 annual report. “However, entry into the Alberta market will require the approval of the Superintendent of Insurance as this product introduces new rating factors. The issue of informed consent by Alberta consumers must be satisfactorily addressed prior to the introduction of any programs.”

In a posted bulletin last fall, Ontario’s regulator, the Financial Services Commission of Ontario, placed heavy emphasis on privacy issues and data collection. Information gathered through telematics technology, or other devices, for usage-based insurance pricing, should be considered “personal information” as defined by Canada’s Personal Information Protection and Electronic Documents Act.

The Insurance Brokers Association of Canada has made clear the principles that brokers believe are essential to ensure consumers are protected, including that consumers have the right to control and ownership of data relating specifically to themselves, their families and their businesses.

It is a position reiterated recently by Quebec’s brokers association, which notes “telematics must essentially remain a ‘voluntary option’ for consumers, whose support must be based on informed consent.”

Getting all the necessary ducks in a row has become a pressing issue in light of the possible competitive advantage gained and the apparent receptiveness of consumers to relinquish driving details – including mileage, speed and hard braking – for a break on auto insurance.

“These services can help insurers differentiate and de-commoditize their products. They can also help them focus on a brand-new consumer base to grow new business and improve retention,” Robin Harbage, global lead for Towers Watson’s UBI practice, said in April in releasing recent survey results.

In all, 56% of respondents reported a “strong interest” in buying a UBI policy, 85% noted they would be open to a UBI program, and 94% expressed interest if they were guaranteed premiums would not rise. At 47%, the last point was the most common concern around UBI; privacy issues, including sharing of consumer data, were close behind, cited by 46%.

As well, almost half (48%) of respondents indicated they would be willing to change their driving behaviour.

Amid a somewhat cautious approach by regulators to date, that link to driving behaviour (presumably reducing risk) should be a given.

That approach is critical to be of benefit to insurers, brokers and consumers.