Canadian Underwriter

Regulatory change demands that insurers show regulators using telematics data for claims management would help consumers

April 28, 2016   by Angela Stelmakowich, Editor

Print this page Share

The Financial Services Commission of Ontario (FSCO) has drawn a line in the sand when it comes to using telematics data for claims management, but it is not a given that line will always be in place, Blair Currie, vice president of Canadian business development for Intelligent Mechatronic Systems Inc. (IMS), suggested Thursday during an industry event in downtown Toronto.

2015041414091704uzlmw45axcsf555rytrph45Just four provinces – Ontario, Quebec, Saskatchewan and, quite recently, Alberta – allow telematics at present, Currie told attendees of Insurance Telematics Canada 2016, but Ontario auto represents about 30% of the property and casualty insurance business in Canada.

“FSCO, at this point in time, doesn’t allow telematics data to be used for claims management, and I think that’s just a line in the sand,” he said. “They put that line in the sand because they didn’t want to have denials of policy, denials of coverage because of telematics data,” he said of FSCO.

But if insurers can clearly demonstrate they want to proactively help out consumers by using claims management data, he expects it is possible the commission could be open to listening how to alter the existing approach.

“While there is a line in the sand, it is a line that can be erased,” Currie suggested, telling attendees the issue could be addressed when FSCO issues its new bulletin, expected sometime this fall.

Related: Allstate rolls out telematics auto insurance in Alberta

Insurers seem open to looking to get into the claims management side of telematics, Currie said, but they also need to start looking at whether or not their “systems are geared for that.” For example, if it is clear that serious accidents are more likely to occur at certain times of the day, “do you have a claims management system that captures that amount of time? Can you do a correlation between the data captured and an accident occurring in that period of time?”

Currie said Canada’s migratory business model for telematics will need some time – and likely changes – to move the penetration needle. Currently standing at about 5%, penetration needs to double to approximately 10% before moving on to the model’s next phase, he explained.

The first phase is about pricing, then claims management and, last, ongoing communications to insurance buying (not just at renewal). “Right now in Canada, it’s in the pricing phase,” Currie said, and there is “still got a long way to go.”

On a positive note, however, progress is being made on the cost front. “From our point of view, the telematics costs are starting to come down. They’re coming down because of the technology change,” he said.

Quite promising is what is happening with mobile. “That data is surprisingly robust,” Currie told conference attendees. But not only is the data strong, it is personal, which he regards as important and useful moving forward.

“While you can tell your consumer, your end-user, that on average you’ve increased the chance of an accident by two, three, four times, most drivers aren’t motivated by that,” he relayed. However, if a user can be informed that when he or she uses a hands-free device while driving, the tendency is to drift to the left or speed up, that makes it more personal and “actually more valuable than the OBD2 (on-board diagnostics port) data,” Currie commented.

“Mobile is having surprising benefits in terms of the quality,” he said.

Related: UBI will not realize full potential until regulatory constraints are removed, telematics conference hears

A continuing barrier to getting to 10% penetration, though, revolves around value proposition. “Generally speaking, research has shown that the value proposition is not well-understood,” Currie pointed out.

“I think this is understandable when you look at that penetration is only 4% or 5% in Canada. Ninety-five per cent of users and drivers have not tried this, so the value proposition is not interesting right now because I haven’t signed up for it, it’s not top of mind, it’s not part of my life,” he said.

Canada is different than the United States, so unlike a couple of big insurers south of the border that spend $1 billion annually on advertising to drive home their telematics message, insurers here are not in that position. Using the 10% population approach, Currie asked: “Which insurer is going to spend $100 million to reach that comparable level? It’s not going to be anyone that I can see stepping up soon.”

More important than spending money on advertising is allocating money for educating channels, whether internal for a direct writer or brokers, he suggested. “That channel must be continuously educated,” Currie emphasized.

“Our system is going to have to move in a different way than it has in the United States,” he said. “We’re going to have to combine steps and then we’re going to have to make things that are interesting to the consumer,” he noted, by offering, for example, roadside assistance, automatic vehicle locator or blocking phone use while young drivers are behind the wheel.

“Mobile will help a bit,” Currie said, but emphasized that “it’s not a panacea.” Mobile data is “just a cost-effective solution of getting cheaper data right now. But it will push out notices to you and it will increase engagement,” he said. Long term, it will be necessary to add rewards and recognition, Currie said.

“We know for sure that the technology is going to change, we know that the competition is going to change and the regulation is going to change, so somebody has to be the repository and the teacher of that information. The consumer value proposition is uniquely tied with the education of the industry,” he told attendees.