Canadian Underwriter

Kilometres driven: TD’s non-UBI approach

April 20, 2022   by David Gambrill

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While many insurers tout usage-based insurance as the most accurate way to rate kilometres driven, TD Insurance is offering a new twist on an old ratings variable.

To offer consumers choice, and a more accurate assessment of their driving risk, TD is asking its insured drivers in Nova Scotia to estimate how much they drive annually. These estimates are then charted into an array of “bands,” each of which represents a different range of kilometres driven.

The driver’s auto insurance rate is calculated in part by referencing the band the consumer has chosen. The more kilometres selected, the higher the risk, and presumably the higher the rate.

Only, TD has found consumers may be overwhelmed by the array of choice, so they have simplified the “kilometres driven” rate factor. The Nova Scotia auto insurance regulator has approved TD’s proposal to narrow the number of bands.

“TD Insurance uses the Annual Kilometers variable to track the distance driven annually,” as the Nova Scotia Utility and Review Board notes in its approval of TD’s request for an overall average auto rate increase of 5%. “The client selects from a long list of bands of kilometers driven, the one in which their annual kilometers driven falls.

“The company proposes to reduce the number of bands that the client selects to five. TD Insurance notes that the bulk of its exposures were concentrated around the end points of each of these new bands.

“The use of the new bands should make it easier for clients to estimate their annual driving. The current narrower and more plentiful bands require a more accurate estimate that may make the calculation too onerous for the client. TD Insurance expects better estimates of annual distance using these new bands.”

TD proposes to use the same approach for its rating variable, Distance Driven to Work.

“TD Insurance uses the Kilometers Driven to Work variable to capture the commute distance driven,” Nova Scotia’s auto insurance regulator notes. “The current structure has many bands of various distances ranging from no commute to a commute of more than 250 km.  The revised structure reduces the bands to five.

“TD Insurance states customers may have difficulty slotting their commute distance properly and correctly into the more numerous and narrower bands. The simplified structure should make it easier for the client to properly report the commute distance.”


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