October 1, 2013 by Craig Harris, Freelance Writer
While usage-based insurance (UBI) has taken off in several countries, the acceptance of telematics in Canada has been tepid at best. Some insurers, such as Desjardins General Insurance Group through its Ajusto product, have found a way to bring UBI to market; more companies are content to conduct research and tire kick concepts.
One of the main reasons for the slow adoption rate here is consumer privacy. Many are raising alarm bells, or at least waving caution flags, about the intrusive nature of this technology. Articles on the subject in mainstream media invariably use the term “big brother” to invoke Orwellian fears of constant surveillance.
Case in point was an article that appeared in The Globe and Mail August 29. “Our private lives began evaporating with the introduction of the mobile phone and now car manufacturers and insurance companies are coming for what’s left,” wrote Andrew Clark in a column, Big Brother is Behind the Wheel. “They call it ‘telematics’ – a fancy word for spying.”
It is not just media naysayers, but lawyers, consumer advocates and, increasingly, insurance brokers, calling for better and clearer rules on the use of telematics. The Insurance Brokers Association of Canada (IBAC) recently approved a “Telematics Principles” position paper for insurance companies that examines implications for consumer protection. In it, IBAC stakes out its position: “Changes in technology must not be allowed to impair consumers’ fundamental rights to control, privacy and choice.”
NEED FOR CLEAR PROCESS, RULES
Brenda Rose, chair of IBAC’s technology committee, says the association is not against telematics, but rather wants to have transparent principles in place for its role in UBI. “In the Canadian marketplace, more and more insurers are looking at telematics and UBI,” Rose notes.
“We issued the paper because we want to have clear processes and rules in place before we get too far into this. It is a competitive marketplace and companies are looking for any edge they can get. They will be introducing these products and we want to be clear what the rules are for consumer protection,” she explains.
Randy Carroll, chief executive officer of the Insurance Brokers Association of Ontario (IBAO) in Toronto, suggests that UBI could veer into the use of lifestyle rating factors, which is prohibited in Ontario.
“Consumer protection needs to be front and centre when it comes to telematics and, from a regulatory point of view, we can’t let protection be overlooked as we move forward in the new world of underwriting,” Carroll comments. “If an insurer needs to gather data like speed, kilometres driven, braking and cornering to rate a policy, then that is the only data (it) should get from the consumer,” he emphasizes.
Carroll notes the principles outlined in IBAC’s paper were used by IBAO’s wholly owned subsidiary, Independent Broker Resources Inc. (IBRI), when it announced in mid-September a partnership with United Kingdom-based Quindell Portfolio PLC to offer telematics in Canada. The exclusive five-year agreement will involve Quindell providing the technology and IBRI managing the launch of IBAO’s telematics initiatives to its membership base of about 12,000 brokers.
“IBRI and Quindell’s partnership will be unique as their telematics model is focused on consumer protection and data privacy,” notes a press release from IBAO. “With IBRI and Quindell’s telematics product, consumers will truly own their own data and their privacy is protected. Unlike other offerings that are in the market today, the consumer is in control of how they share the data and with whom,” the statement adds.
Desjardins Insurance is the only insurer with a UBI offering approved by regulators in Ontario and Quebec. Its Ajusto product (and IntelAuto for customers of its subsidiary, The Personal) was launched in May, which coincided with widespread news of the U.S. National Security Agency’s (NSA) warrantless surveillance program, as well as similar electronic eavesdropping initiatives in other countries, including Canada. Desjardins spokesperson Joe Daly reports that the program already has 30,000 UBI customers.
“We see much greater acceptance and use of usage-based insurance once consumers better understand the benefits and safeguards,” Daly notes. “We think the privacy concerns are overblown, particularly with all the information people now make available through cellphone usage and social networks, such as Facebook.”
Daly points out that an internal review of the Ajusto program was done to ensure it is in compliance with all privacy legislation, including addressing issues of consent, usage of information and security of data. “Our clients’ privacy is extremely important to us,” he says. “We have a very transparent approach with the customers, with our terms and conditions available on the website and on paper in the box containing the device.”
Privacy regulators have publicly stated the product is in compliance with relevant legislation and have even lauded Desjardins’ transparent approach. “We should applaud companies that are offering innovative programs for their customers that are highly respectful of privacy and this one is extremely,” Ann Cavoukian, Ontario’s information and privacy commissioner, told the Ottawa Citizen.
In an interview, Michelle Chibba, director of policy and special projects at the Office of the Information and Privacy Commissioner of Ontario, says the telematics program offered by Desjardins passes the privacy test for two reasons. “First, the program is voluntary and within the control of the individual to make an educated decision,” Chibba notes. “The second reason is that the contract is transparent and the privacy issues are outlined upfront. The contract clearly defines how the data will be collected and what it will be used for.”
CONCERNS OVER DISCLOSURE
Nevertheless, some consumer advocates and lawyers say the technology and processes behind UBI are not necessarily or thoroughly benign. “One of my main concerns is that the information people share about their driving behaviour can be disclosed to third parties, including law enforcement, plaintiff lawyers, Crown attorneys, and so on,” says John Lawford, executive director and general counsel with the Public Interest Advocacy Centre (PIAC) in Ottawa.
“If it is a criminal matter, it can certainly be disclosed, but if it is a civil case, lawyers won’t have too far to dig to get this information as part of litigation. It will be up to the judge, not the insurance company, to determine if it is producible evidence,” Lawford says.
“In privacy legislation, it is not always the rules, but the exceptions,” comments Michael Power, a Toronto-based lawyer who is an expert on privacy law. “There are always certain exceptions that can involve the disclosure of personal information. These can be to law enforcement agencies, investigative bodies, but they can also involve rules of procedure in civil litigation, in terms of what is admitted as evidence. Privacy laws were not designed to infringe on things like rules of civil procedure,” Power explains.
While no specific case law on private insurer use of UBI exists in Canada, there have been some findings from privacy commissioners at both the federal and provincial levels on employer-employee use of telematics.
Power notes that two findings from the Office of the Privacy Commissioner in Canada, one in 2006 (involving a telecommunications company) and one in 2009 (involving a municipality), essentially reached the same conclusion: that using a device such as a GPS to track a vehicle is not overly privacy invasive; however, routinely evaluating worker performance based on assumptions drawn from GPS information impinges on individual privacy.
A similar conclusion was
drawn by Elizabeth Denham, British Columbia’s information and privacy commissioner, in a December 2012 decision involving Schindler Elevator Corporation, which installed telematics equipment in its company vehicles. “I am persuaded that Schindler’s collection and use of employee personal information for the purposes, and in the manner described above, is reasonable and is authorized under PIPA (Personal Information Protection Act),” Denham stated.
“So the use of telematics, within reason, is permissible and reconcilable with Canadian privacy law,” notes Power. “However, there is not a lot of specific guidance as to how best to use telematics.”
INFORMATION CONSIDERED TO BE PERSONAL
It is the “how” of private insurer telematics usage that concerns brokers. For example, one of the issues raised by IBAC is consumer access to, and control over, personal information. “Consumers have the right to challenge the veracity of information collected about themselves and must be provided the opportunity to correct or stop the collection of information at any time,” notes IBAC’s telematics principles paper.
“The data collected from telematics programs is considered personal information,” Rose says. “Consumers should still have a right to access it, control it and they should be able to take it to a different insurance company. How, exactly, insurance companies develop their rules and contract around this will be the test,” she suggests.
Carroll observes that there are other models of information sharing in the insurance industry that should be followed by any telematics solution. “Consumers need to own their data, have access to it, and it needs to be portable,” he says. “(This is) no different than how motor vehicle records (MVRs) are handled today; the same system needs to be implemented when it comes to telematics.”
In an IBAO newsletter, Carroll cited a June 2013 client alert from U.K. law firm Morrison & Foerster that outlined guiding principles for insurers on the use of telematics. That paper analyzed data protection, policy terms and condition and policy management, encouraging insurers to consider key legal issues, such as third-party provider service arrangements, regulatory compliance, customer policies, promotions and marketing and claims management.
It also noted the Association of British Insurers (ABI) has issued a guide to “ensure that insurers providing telematics-based policies treat customers fairly and protect their data.”
Daly says that Desjardins’ Ajusto program collects information about the car, not necessarily the driver. “It is important to understand that all of the information collected is at the vehicle level, meaning that it is not possible to distinguish individual driving behaviour,” he says. “For example, the device derives the total kilometres the vehicle is driven, not the kilometres driven by each individual driver.”
The product will only be used to offer consumer discounts – a provision that the Financial Services Commission of Ontario (FSCO) required before approving the program, Daly reports. “Your premium won’t go up because of the data collected on driving habits for your vehicle,” he says.
“At renewal, your premium will be calculated as usual, based on the usual insurance rules. If your situation changes, a number of factors can raise your premium (if you have an accident during the year, for example) or lower it (if you move closer to your place of work, for example), but any increase in premium will be completely unrelated to the Ajusto/Intelauto program,” Daly notes.
Lawford says that he is skeptical about insurer promises that they will not use the data for future purposes. “I can’t believe that the insurance company will simply ignore this information,” he observes. “They collect the information, but they may not tell you what they are going to do with it down the road.”
There are other potential scenarios that Lawford cites as potential concerns with telematics, including disagreements with insurers about data interpretation/algorithms, a gradual move to mandatory installations or even possible discrimination of people based on where they drive.
“What happens if I drive to work back and forth along my usual route, but the insurer thinks this is not a good area of the city?” he asks. “Will we see behavioural pricing for auto insurance reinforcing social stereotypes of where people live, where they drive?”
Others say it will be consumers who ultimately weigh the cost-benefit ratio of UBI products. “Telematics is surveillance technology, no doubt,” says Power.
“The real question is the level of acceptance by consumers of this technology. Does a lower premium represent enough of a benefit for consumers? Does that really demonstrate enough value? I think privacy-conscious consumers would expect more from that deal in how that information is collected, used and disclosed, in terms of transparency and even the level of control they have over that information,” he adds.
BIG QUESTIONS, BIG ANSWERS
Privacy concerns around UBI extend to the world of “big data,” particularly if the information collected is aggregated, repurposed and sold or shared to third parties. In its telematics guidance paper, Morrison & Foerster stated: “Given the explosion of ‘big data’ analytics, the more extensive and varied data that can be collected via a telematics device, the more potentially valuable that data will be to insurers and third parties and the more complex compliance issues may be.”
The sharing of data, even if it is “anonymized,” represents a potential stumbling block for any UBI product.
“One concern we have when organizations collect and have all this data is what we call ‘function creep,'” Chibba says. “They look at all this luscious data and say, ‘Wouldn’t it be great if we used it for targeted marketing or reselling to third parties.’ That is where there would be a problem from our end,” she notes.
“I always say when it comes to privacy, there is a deal,” says Power. “The deal is that consumers agree to share personal information and receive a benefit. The sharing of that information is related to a specific purpose. If that purpose is altered or revised for any reason, that is when you get into trouble,” he adds.
For insurance brokers, the role of big data in telematics and other offerings often poses more questions than answers. “The problem is we don’t know what is possible when it comes to data collection and usage,” Rose says. “What you couldn’t do six months ago, someone has figured out how to do today. The challenge is in creating the rules to protect consumers when we don’t even know what the game is. It is a moving target, especially if you look at data aggregation,” she suggests.
Desjardins states on its Ajusto website that “Collected Data” – vehicle location, time, device disconnections/re-connections, VIN – from the UBI product are subject to specific conditions. The company offers the following assurances: “We will not use the Collected Data to cancel your policy, surcharge your premium or decline your policy renewal. We will not sell Collected Data to any third parties. We will not use Collected Data to your prejudice regarding an insurance claim you have with us or in any claim that is brought against you.”
However, Desjardins also has an agreement with iMetrik Solutions, a wireless solutions provider, which anonymizes this data. “IMetrik can only aggregate this anonymized data and provide third parties with general information that cannot be linked to a specific vehicle (for example, aggregated traffic volumes),” the insurer states.
Daly confirms that iMetrik can share data with third parties, including but not limited to municipalities and public safety groups. “Since the program is still quite new, it’s difficult to anticipate all of the potential uses for this type of anonymized, aggregated data,” notes a statement from Desjardins.
Lawford suggests it is precisely this kind of information that may be of inter
est to a wide range of organizations, such as government agencies, police and even marketing firms. “Marketers are quite interested in this repackaged information for things like behaviour targeting and location-based ad delivery,” he says. “Consumers may not want to be supporting another revenue stream for insurers and their service providers, especially considering it is their information that is being repackaged.”
In the brave new world of information sharing, others have expressed concern about how truly “anonymized” or de-identified personal data can be. In particular, data from one source may be made anonymous, but when paired with other existing data sets, it becomes possible to re-identify that data.
“What does the company really mean when it says it has de-identified the data?” Rebecca Herold, a senior consultant with Cutter Consortium, based in Arlington, Massachusetts, asks in a recent paper. “This is a very fuzzy, subjective term. Is such de-identification really removing the ability to point to specific individuals?”
NEED FOR LEGISLATIVE CHANGE
These and other concerns around big data prompted the Office of the Privacy Commissioner of Canada to release a position paper in May 2013 calling for substantial changes to the Personal Information Protection and Electronic Documents Act. “As the environment evolves, the risks to privacy continue to grow,” the paper notes. “Organizations are using personal information in ways previously unimaginable. While many of these new uses will have the potential to benefit individuals and society, there are risks that personal information may be used in ways that are highly intrusive and offend our sense of privacy.”_While any wholesale legislative changes will likely take years, Chibba observes that companies continue to have an obligation to their customers, no matter what technology is used. “We say that the ownership of data resides with the individual, and the organization is the custodian of that data,” she notes. “In that sense, the organization has responsibility for its practices and for its technology.”
That “custodian” role may be expanded as insurers look at other functions and uses associated with telematics. “Further down the road, we anticipate that Canadian providers will bundle other services such as roadside/emergency assistance with their telematics programs – similar to what’s now happening in the U.S. and Europe,” Daly predicts. “As cars get safer with collision-avoidance systems and better connected through telematics, the impact on the auto insurance industry will be significant.”
How insurers collect information, and how transparent they are with the use and aggregation of that data, will be tested by consumers and regulators alike when it comes to telematics and big data.
“As devices like telematics become standard equipment in automobiles, consumer protection will need to evolve and keep pace with the technology it brings,” Carroll says. “Consumers will become more comfortable with sharing data over the next few years; we just need to be smart enough not to abuse it. We have witnessed how some industry players abused the use of consumers’ credit information and we need to learn from those mistakes and not repeat history in the telematics space,” he cautions.
Rose says she has not heard direct feedback to the IBAC telematics principles paper from insurance companies, but is planning to meet with executives about potential UBI offerings in the near future. “We have initially focused on telematics because we know how big that box might be,” she concludes. “But stay tuned for big data and predictive analytics.”