How usage-based insurance affects this carrier’s profits

Pembridge Insurance Company is asking brokers in four provinces to tell auto clients how much they could save by using a usage-based insurance app.

Some motorists do not want usage-based insurance, Bob Tisdale, president of Pembridge, said Friday in an interview.

But still, the company encourages its brokers to present a quote from Pembridge as if the client was enrolled in My_BRIDGE, Pembridge’s usage-based insurance.

“We are seeing our retention of customers who are on usage-based insurance is significantly higher than just normal retention, because once a customer gets on if they have earned a discount, then they are going to keep earning that discount going forward,” Tisdale told Canadian Underwriter.

Pembridge, a subsidiary of Allstate that distributes insurance in Canada through brokers, announced Wednesday its My_Bridge UBI program is now available on smartphones. Instead of installing a device in their car, users can now download an app for an Apple or Android smart phone.

All My_Bridge users in Alberta, New Brunswick and Nova Scotia get a 10% discount simply for enrolling. Ontario customers’ enrollment discount is 5%. Depending on driving behaviour, clients could save up to 30% on annual renewal, said Tisdale.

Across its companies, Allstate has observed that UBI clients are 34% more profitable than conventional auto clients – using loss ratio as a measure of profitability.

One of the reasons is drivers who know they are low-risk may be more likely to select UBI.

But Allstate has also observed improvement when drivers are given reports on their behaviour, said Tisdale.

“If there hard braking incident at (Ontario Highway) 404 and Major MacKenzie Drive, for example,  it can show them and the person can look at the report and say, ‘Oh yeah, I remember that,’” said Tisdale.

With My_BRIDGE, Pembridge will monitor drivers for six months and then use their behaviour to decide whether they get a discount on annual renewal and if so what that discount is.

“After six months, you have a clear picture of what the driver looks like. If you monitor for nine months it’s not going to change much after six months, so six months is really the period you need to look at for the person’s behaviour,” Tisale said.

For the broker, this can improve earnings long-term, he suggested.

“If a customer is not getting a discount they are more likely to shop the market. From a broker perspective, the business is more profitable and the business stays with the broker longer. What the broker gives up a little bit at the start is a little bit of commission because the price is lower, but they make that back by longer retention of that customer.”

With My_BRIDGE, Pembridge assesses driver risk by monitoring speed, hard braking and time of day.