Tele-Envision

It is time for a change.

Telematics – at present, primarily for auto, but in future, likely for so much more – needs a freer regulatory environment if it is to realize its possibilities and allow players in Canada’s property and casualty insurance industry to find their niche.

The discount-only model that currently dominates usage-based insurance (UBI) auto offerings here at home needs some room to expand.

Some decisions have been made, with several companies already having moved forward with offerings; others, while not idle, are waiting a while longer to see just how things shake out.

Not everyone will fit into that general, across-the-board space. Such an approach could initially be positive for consumers, as providers compete on price and benefits to gain customers. But the ceiling would eventually be reached, necessitating, again, more decisions to determine if the offerings make good business sense or if exiting is a better move.

And for providers, it may be that some small (or even medium-sized) players would be unable to compete over the long term. Now is the time – for each insurance company, broker or vendor – to, first, determine its target market for telematics and UBI, and, second, how that market fits with the business’ strategic outlook and goals going forward as the wider possibilities unfold.

Rethinking the space in which a particular provider will play is critically important. That may be the only reliable way that competitive advantage will be gained and all types of customers can benefit. Rather than one very big space, a lot of smaller, focused ones are created.

Focusing on a few areas (and understanding them inside and out) can help with advancing and cementing relationships, the loyalty from which will be key as telematics-related offerings move beyond auto to home, life, safety and all manner of customer convenience, needs and wants.

It may also help to develop partnerships with those outside the insurance realm that could assume a bigger role for customers and providers alike in the future.

Telematics “opens the door for Canadian insurers to build even more precise and custom profiles of their customers activities,” Marc-Andre Giguere, EY Canada’s national insurance leader, wrote in a recent article for Canadian Underwriter.

“Data mining, or the ability to connect and use multiple streams of digital information to design customized offerings, can identify new hidden revenue opportunities and improve customer satisfaction,” Giguere noted.

Auto insurance is clearly not the end game. The data that is already available – understanding and use of which will grow as more customers come on board – opens the door to much more.

In fact, insurance overall is likely not the end game, but rather interconnectedness and improved life, safety and convenience realized through more sophisticated use of data.

Still, telematics could offer an opportunity to identify customer-specific insurance needs and provide advice, which, it is hoped, could build loyalty that will be there as additional offerings and services unfold.

But before all this happens, telematics must gain more traction. “The discount-only model effectively limits UBI programs to low-risk drivers and low-risk behaviours,” Colin Wright, principal of Corner Two Consulting, said during a recent technology conference in Toronto.

And that influences the data being collected, Wright said. “By only collecting data from a subset of drivers, self-selected from the UBI program because they had the reasonable expectation of getting a discount, you don’t get much closer to really understanding the full spectrum of behaviours.”

Canada’s property and casualty insurance industry needs an environment in which telematics-related innovation can thrive and a wider breadth of data can be collected, essential to developing market-specific offerings. This will serve providers and consumers alike.

Regulators must work with the p&c industry on how best to loosen telematics rules, without making them lax.