Ontario’s insurance regulator is open to discussing “pay-as-you-drive” auto insurance programs with the province’s insurers. But it wants to start slowly, echoing brokers’ concerns about rating transparency and privacy of personal information.
This means tempering the premium discounts that insurers are prepared to offer policyholders to participate in the novel projects, Bruce Green, a senior manager at the Financial Services Commission of Ontario (FSCO), said at the Usage-Based Insurance Symposium held in Toronto on February 12.
“We’d really like to start small, starting with a more modest discount than one would potentially see in one of these kinds of [pay-as-you-drive] programs,” Green said. “We appreciate it’s a difficult balance for you [insurers] to get people to sign up if the discount is so modest, and people are saying, ‘Why bother?’…
“Let’s work on a plan together, regardless of that initial approval [of a smaller discount], let’s take a closer look at what we’re going to have to have in that program and make sure you have the proper processes and mechanisms in place.”
Currently, not many insurers in Canada offer pay-as-you drive auto insurance programs, which are much more common in the United States. Industrial Alliance has such a program, and Aviva Canada ended a five-year pilot of its Autograph program in 2010.
Canadian insurers have long touted usage-based insurance – also known as “telematics,” or “pay-as-you drive” insurance – as a more accurate, refined way to price consumers’ auto insurance risks. This will allow insurers to offer better prices to drivers who are genuinely lower risks, they say.
Pay-as-you -drive insurance calls for participating policyholders to place tracking devices in their vehicles. Data collected include the speed of the car, the braking patterns, where the car drove, when the car drove, etc. Assuming the driver practices safe driving habits and agrees to share the information their insurers, brokers’ carriers would then be able to offer discounts for good driving behaviours.
Brokers have treated the new technology with some scepticism. They raise concerns about rating transparency and the privacy of their clients’ information.
FSCO echoed some of the brokers’ concerns at the symposium. In particular, the regulator said it dimly viewed vague marketing promises to consumers in a bid to entice them to use the new product.
“We see a lot of sales materials say ‘up to a 25% discount,’” Green said at the symposium, which was organized by the Insurance Bureau of Canada (IBC), a trade organization sponsored by Canada’s property and casualty insurers . “But in reality, if a very small number of policyholders are going to see that large discount, I think [the insurers’ sales materials] need to be realistic. It’s really important that the consumer understand how the data are being collected, and how it translates into a specific discount.”
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.
The Autograph product did answer the regulator and brokers’ concerns about privacy, said Paul Fletcher, senior vice president of marketing at Aviva Canada. For example, participating policyholders would plug the devices into their vehicles. Once they were finished driving, they would then transfer that data over to their computers at home and get a reading on what their discount might be for those driving behaviours.
Since the consumer had to make an active decision about whether to hand the data over to their insurers, this answered privacy concerns about how the data were collected, Fletcher said.
