Direct writer launches pay as you drive

Brokers have already seen usage-based insurance pilot projects come and go. Is the product viable in Canada?

Direct writer Desjardins Insurance is rolling usage-based auto insurance into the Ontario market, launching a new program called ‘Ajusto’ that boasts savings of up to 25% on an individual’s insurance premiums based on the customer’s driving habits.

The program is available only to new and existing customers of Desjardins Insurance. Ajusto is a free and voluntary program available to all Ontario car owners who drive a vehicle made in 1998 or later with limited exceptions. The program measures three factors to determine cost savings:
Distance travelled annually (up to 10% per off)
Extent and frequency of hard braking and acceleration (up to 10% off)
Time of day the vehicle is driven (up to 5% off)
Premiums will not increase as a result of participating in the program nor will it result in any other adverse effects, Desjardins said. Customers can opt-out of the program at any time and without penalty.
“Savings with Ajusto are in addition to other savings offered by Desjardins Insurance,” said Ken Lindhardsen, vice president of claims operations and legal counsel. “Our studies show that our employees who participated in a pilot program were on track to achieve an average additional savings of 12%.”
Desjardins is not the first to offer pay as you drive insurance in Canada’s largest auto market, although currently not many insurers in Canada offer pay-as-you drive auto insurance programs. (continued.)


Industrial Alliance has a program in Quebec, and Aviva Canada ended a five-year pilot of its Autograph program in 2010. 
Aviva Canada introduced Canada’s first pilot pay-as-you-drive scheme in 2005, with 22 brokers participating in distributing the product. The ‘Autograph’ program lasted until 2010, at which time Aviva ended the pilot without commercializing the product. Among the reasons for cancellation, the insurer cited high support costs to maintain the program.
Canadian insurers have been calling on brokers to get comfortable with the notion of usage-based auto insurance for some time. But brokers by and large are skeptical about the durability of the product, often citing concerns about the sustainability of the product’s pricing. 
“If it’s a user who is hardly using the car, you’re not going to get enough premium for it,” said Brad Jefferson, owner of Rand &Fowler Insurance in B.C. “It takes as much to write that policy as it does to write a policy where you know what you are insuring.”
In a conventional insurance product, everyone knows know how much the client is going to use the car, and how much the client is going to be paying, Jefferson said. Everybody knows the risk, and the premiums being collected for the risk. 
“In this [pay-as-you-drive] case, the client may only use the car a little bit, and you’re picking peanuts up all day long,” he said. “Then he has a claim and you’re really backwards that way. So that’s why I don’t like it.”

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