Car insurance companies are lining up at the door of Ontario’s financial services regulator seeking approval to launch a new type of policy they say can cut the average annual cost of insuring a car by 15 per cent.
“We think in markets like Ontario there will be demand for this,” said Ryan Michel, an actuary and chief risk officer for Allstate Canada. “It gives people a better understanding of how they are driving and if you drive better than average you can get a reward.”
Michel said that Allstate hopes to offer a plan within the year, as the company has 5 per cent of the GTA car insurance market.
“There are four Ajusto-type programs operating in 47 U.S. states,” Michel pointed out. “Allstate has been offering a U.S. plan since 2010 and in three years has attracted 430,000 new customers.”
He says the policies appeal to cash-strapped families with children ever eager to save money, along with parents looking to reduce the high insurance cost of young drivers. (continued.)
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Desjardins Insurance launched its Ajusto program in May of this year, offering a 5 per cent discount for enrolling. A wireless device is installed in the car’s diagnostic port to track driving patterns.
The device measures distance traveled, frequency of hard braking and fast acceleration, how quickly you turn and the time of day you use the car. The information is used to create a profile of your driving habits, which is compared to the benchmark. You can view your profile on Desjardin’s website and see a rolling estimate of how much of a discount you will get at renewal.
“We have attracted 40,000 new customers in four and a half months,” said Joe Daly, a spokesman for Desjardins. “We are very happy with the launch.”
He does cautions brokers to fully explain to their clients that few people will fall into the ‘perfect drivers’ category and receive the 25 per cent discount – as the average is more likely to be in the 12 to 15 per cent range.
In Desjardins’ model, if you drive more than 15,000 km a year – not a lot for GTA commuters – you can’t earn more than a 15 per cent reduction. You are penalized for exceeding that mileage limit and are probably driving at high risk times of day like rush hour. You are also penalized for late-night driving, because adverse weather tends to have a greater impact on accidents at night and statistically the accidents are worse. (continued.)
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Spokesman for the Insurance Bureau of Canada Pete Karageorgos said most of the big players are looking at applications to sell the product. However, as each plan must past a review by the Financial Services Commission of Ontario, progress may be slow. One issue is the privacy of the information collected.
Concerns cited in a FSCO presentation delivered at several insurance industry events caution that the devices “could be viewed as an intrusive ‘big brother’ technology,” stressing that it is important that consumers are fully informed of the type of information being collected, how the information will be used and give consent in writing when agreeing to participate.
