Insurance telematics will let you know
From the June 2013 print edition of Canadian Automotive Review.
“I’m an excellent driver!”
In what 1988 movie is the above line delivered? It was uttered several times by the title character, Raymond Babbitt, in Rain Man.
Can you actually prove that you are an excellent driver? Anecdotally, perhaps. Present your driving record—and there you have it: apparent perfection—not even a parking ticket. You are to be commended.
But is that reality? Are you that good a driver? The fact you have a flawless record may be the result of being over-cautious, or one who has somehow managed to stay under the radar, literally.
Surveys routinely find that around 80 percent of drivers think of themselves as being of “above average” ability. Sadly for them—and happily for common sense—their insurers do not take such claims on faith!
Canadian drivers now have the ability to prove it by signing up for one of two unique programs available that can determine if you are a better driver than most—and will reward you with lower premiums. Industrial Alliance Auto and Home Insurance introduced “Mobiliz” to Quebecers in mid-April 2012. Similarly, on May 13, 2013, Desjardins General Insurance Group launched “Ajusto” in Ontario and Quebec. Both offerings are geared to personal vehicle usage.
Mobiliz was originally intended as a potential societal initiative aimed at improving poor driving behaviour and combating the speeding plague among new and inexperienced drivers aged 16 to 24 in Quebec. The Mobiliz business model is quite simple; an auto insurance program based on the “Pay-As-You-Drive” (PAYD) concept. Ultimately, a driver’s insurance premium is based on how the driver conducts him- or herself in an automobile—rather than on being part of a specific age group or on any existing claims history. Consequently, youths who adopt safe and responsible driving habits can benefit from the lowest rates in the industry within their demographic—up to 25 percent less.
Desjardins unveiled its own version of user-based insurance (UBI)—but their offering was to all drivers. Ken Lindhardsen, Desjardins’s vice-president of claims operations and legal counsel stated, “When combined with other Desjardins Insurance savings, Ajusto represents the ultimate form of personalized insurance. In fact, it is possible to earn a maximum of 25 percent savings with Ajusto.”
How does some faceless corporation know what you are doing in your vehicle once you turn on the ignition? It’s all down to technology, more specifically, telematics.
Typically, telematics is any integrated use of telecommunications and informatics, in this case, for application in vehicles and to control vehicles on the move. Telematics includes, but is not limited to Global Positioning System (GPS) technology integrated with computers and mobile communications technology in automotive navigation systems.
Telematics is commonly used by fleet management companies—especially where specific vehicle data helps to determine shipping costs and overall vehicle maintenance costs.
Vehicle telematics can help improve the efficiency and ultimately, the viability of an organization and its vehicles. Some practical applications of vehicle telematics include the tracking of cars, trucks and vans; trailers; containers; and, even cold storage units. In its simplest form since initially introduced in the late 1970s, gathering information of fuel consumption and time and distance travelled will allow an organization to determine schedules and even rate structures. Today, the amount and type of data gathered and analyzed may be customized to practically any situation.
UBI has been around for a few years. The insurance industry has been developing simple telematics systems that function in a wireless (wi-fi) environment designed specifically to monitor (at the very least) three areas that traditionally have an effect on insurance premiums and how they are established. For example:
There is no official fleet version of this type of insurance offering available in Canada.
Insurers are coming to realize, however, that basing premiums on past claims is not a better way of conducting business. Some unscrupulous management may knowingly employ drivers other firms might consider to be too risky—but through sheer luck, these drivers may have been able to avoid accidents—or detection.
If a fleet manager is serious about reducing costs associated with running a fleet, examining opportunities that could reduce expensive premiums is one additional solution—and telematics can provide the answers. Insurance premiums can represent a fleet-oriented company’s third biggest cost. Insurance providers will be able to identify risky and potentially dangerous driving behaviour that may result in a future accident. Insurers who have the ability—and permission—to tap into their customers’ telematics data will be looking for relevant information on speed, hard braking, abrupt lane changes and rapid acceleration.
“From an underwriting standpoint, it flips the (present) underwriting model on its head,” stated Scott Cober, vice-president of Marsh Canada’s trucking practice in an interview last year. “It becomes more of a predictive underwriting model.”
To be clear, using telematics to determine insurance pricing will allow insurers to charge premiums that better reflect any fleet’s likelihood of being involved in a crash. Ideally, insurance providers will be able to use the collected data to even alert a fleet to worrisome trends and even encourage interventions before such accidents occur.
Cober continued, “Fleet insurance underwriters currently review driver abstracts for tickets and look at accidents to assess a high-risk driver in the fleet. A fleet’s risky drivers may not even be the ones with either accidents on their records or even tickets, but (may be) those who are trending towards bad behaviour on the road. For example, making unsafe lane changes and cornering at high speeds.” Drivers who consistently exhibit these poor driving traits are possible future accidents and claims waiting to happen.
So is Big Brother about to become more invasive? That depends entirely on your point of view.
From a fleet position, when you sign on as a driver, as an employee or a contract driver, you agree to that organization’s terms and conditions. Any data gathered that reports on your driving habits is considered fair game—and presumably you agreed to this.
From an individual consumer standpoint, some may look at this as a major invasion of privacy.
With the two Canadian programmes, Mobiliz and Ajusto, you agree to allow the underwriting firm to collect your specific data. The agreement between you and each company is quite specific; the company will not share your data with anyone other than you. And you access it via a secure portal on their web site and will see, at a glance and in real time, where you stand.
Some may find all this a little too invasive for their liking.
But hold on a moment; were you aware that in North America, for the 2013 model year, all new cars are equipped with a “black box”—an event data recorder (EDR)?
These devices record what happened to the vehicle at a particular “event”. EDRs automatically record the actions of drivers and the responses of their vehicles in a continuous information loop—in the same way a local variety store’s video security system might record in-store activities.
Black box recorders are usually associated with airplanes—more specifically, airplane disasters. An EDR collects information during a flight to allow aviation authorities to determine what happened during that flight or, more importantly, what went wrong before and during an accident.
When a car is involved in a crash or when its airbags deploy, input from the vehicle’s sensors during the five to 10 seconds before impact is automatically preserved. That’s usually enough to record things like how fast the car was travelling and whether the driver applied the brake, was steering erratically—or even had a seat belt on.
All in all, black boxes have had a positive effect on automotive safety since they first hit the road. Remember, the idea is to gather information that can help investigators determine the cause of accidents and lead to safer vehicles. EDRs are only accessed in the event of an accident. They do not transmit your driving data while the vehicle is in use.
The first official insurance telematics program emerged in the UK in 2006 and since then, in Europe especially, the acceptance and implementation of more PAYD policies by various underwriters has grown exponentially, according to a survey released by the PTOMELUS Consulting Group in June 2012. At that time, there were nearly 75 PAYD insurance launches and trials. Some might argue that this broad-based acceptance may be a result of the general state of economies in the European Union where consumers who require personal transportation continue to look at new ways to significantly reduce their day-to-day costs.
Ajusto and Mobiliz provide their telematics free of charge and state that installation is quite straightforward. In the coming months and years, it is likely more players will emerge in this market.
There are, however, possible dilemmas that may arise from a full-on embrace of telematics with the insurance industry.
Consider this; according to a recently viewed presentation by The Celent Insurance Practice, auto insurance is a pillar of the property/casualty insurance industry in Canada. In fact, in 2011, auto insurance accounted for 50 percent of the total property/casualty premium. At present, the number one reason auto insurance premiums are an integral part of the insurance business is because, quite simply, a lot of accidents happen.
However, due to advances in design, engineering and of course, technology, there are already reductions in the number of traffic-related accidents, bodily injuries and fatalities. What happens when data collection and everything connected with the manufacture of vehicles takes us to a point where this success continues and vehicles become much safer and incidents are dramatically reduced?
With technology being deployed on a widespread basis there is potential the need for auto insurance, as it is known today, is substantially reduced and insurers would see a large reduction in their revenue as premiums drop. In a posited scenario, it starts with telematics, advances into collision avoidance systems (available today in some models), moving into automated enforcement and finally driverless cars. Insurance companies may become obsolete.