Auto insurance regulators outside of Quebec ‘have to change’ their approach to telematics, exec says

Canada’s provincial auto insurance regulators are relatively cautious in their approach to telematics, but this is changing, suggested speakers at an insurance technology conference this week.

“If we want this to transform the industry, our regulators will have to let us transform,” said Michel Laurin, president of Quebec-based Industrial Alliance Auto and Home Insurance Inc. Laurin was responding to a question from an audience member, on the difference between the approaches of Quebec and other provinces, after his keynote speech Tuesday at the property and casualty Insurance Technology Conference.

Industrial Alliance offers usage-based insurance under its Mobiliz brand in Quebec. The carrier includes discounts for good driving behaviour but also adds surcharges – of up to 100%- if customers display “irresponsible” behaviour, Laurin said.

Although Quebec allows surcharges under UBI, Laurin noted other jurisdictions in Canada allow only discounts.

“The way the authorities allow the usage of UBI in other provinces is mainly as a supplementary underwriting tool over and above all the others,” Laurin said. “To me, this has to change.”

Provincial insurance regulators were “cautious to start with,” when dealing with telematics-based auto coverage, suggested Robin Joshua, director of corporate underwriting and risk management for CAA Insurance Company, during a different session at the Insurance Technology Conference, which was held Tuesday in Toronto and produced by Insurance-Canada.ca Inc.

CAA South Central Ontario plans to launch UBI this spring in Ontario.

“In our dealings with them, mostly in the Ontario market, they struggled with UBI,” Joshua said of the regulators during a panel discussion. “Their biggest struggle definitely is privacy – how to protect the consumer, how to protect their data, and the information that is gathered is used in the manner that it is meant to be used, and not for other things.”

The Ontario regulator was also looking for data, Joshua added.

“Any time you go before a regulator they want data – ‘support what you want to do,'” Joshua said. “There is no data. There is U.S data and there is European data but frankly that doesn’t apply in Canada.”

This dearth of data – on top of privacy concerns – were the “two big struggles” that CAA had with the Ontario regulator.

“I must admit they have come around,” Joshua added. “They grasped the fact that this was inevitable, they’ve got to find a way of doing this, so their approach basically has been, ‘Implement but only in favour of the consumer and nothing that can hurt the consumer, and in two years time, come back and talk to us and we will look at it again.'”

One of Joshua’s co-panelists was Blair Currie, vice president of business development at Waterloo, Ont.-based  vehicle technology vendor Intelligent Mechatronic Systems (IMS) Inc.

“In the province of Ontario, they have had their hands full with rate reductions and now they are moving” on telematics, Currie said. “I think they are going to be a little bit easier, and I think the hard path that CAA went through, maybe they helped pave the way, to be a little bit easier with the rest of” Ontario auto insurers.

Tim Scurry, chief executive of Quindell Solutions Inc., suggested the Ontario regulator is going to be looking for additional ways of reducing premiums.

“It’s our job as a supplier, working in conjunction with our insurance partners, to give the regulators the information they really need and crave in order to set policy for the future,” Scurry said during the panel discussion,

Fareham, England-based Quindell Portfolio PLC is providing the technology for CAA South Central Ontario’s telematics offering.

“If you are clever about the implementation of the program, what you can do is you can offer up alternatives to customers to get that vehicle repaired in the area they are in,” Scurry said. “You can do that with the insurer’s approved providers, such as approved rental providers. If you push, as an insurer, volume through to your providers, then over time what you’re going to be doing is saving money and increasing volume.”

Joshua noted telematics is “just the tip of the iceberg” of technological changes that will affect auto insurers.

“There will be driverless cars, 10 or 15 years from now that will dominate the road,” Joshua said. “Vehicle to vehicle technology will avoid crashes. I don’t think that’s far away at all. We have to change our model. We build our rate model on a certain frequency of losses and payouts, which is our cost model. That changes if the vehicles are not hitting each other.”