RSA to offer telematics-based auto insurance in Canada

RSA plans to launch telematics for auto insurance customers in Canada this year and spend about $300 million on updating its computer systems, though its overall strategy remains unchanged, RSA Canada officials suggested to brokers and reporters Thursday.

“Our overarching strategy in Canada remains unchanged,” said Rowan Saunders, RSA Canada’s president and chief executive officer. “We remain completely committed to the broker channel. We have no plans to exit any segments of our business and in fact we are seeking opportunities to build and develop more.”

Saunders made his remarks at an RSA event for brokers in Toronto’s distillery district.

Sophistication in pricing, “if you are going to play in personal lines … is increasingly important,” Saunders said.

“To support this sophisticated approach to our pricing models we will also be launching telematics closer to the end of 2015,” said Donna Ince, RSA Canada’s senior vice president for personal lines. “At RSA we are fortunate that our global footprint has allowed us to see first hand the benefits of telematics,” based on experience in other markets, including the U.K. and the U.S.

Several Canadian insurers are already providing usage-based insurance using telematics technology, which gathers information on driving behaviour such as total distance driven, speed, sudden acceleration and hard braking.

“It’s getting tougher for all of us to compete and to win,” Ince said, of the insurance market in general. “Weather, increased regulation and the race to own and control brokerage distribution have impacted all of our businesses. From my perspective, these trends are actually picking up pace and are going to dramatically reshape our industry over the next three to five years.”

The insurance sector is “a pretty tough environment right now,” Saunders noted.

“It’s competitive, particularly in the commercial area,” he said. “There’s lots of capacity. The reinsurers now have hedge funds, pension funds and alternative sources of capital coming into that market, all in search of yield in such a low interest rate environment, so that’s going to continue.”

Ince alluded to Aviva Canada’s announcement last month that starting in May, it will offer an overland water endorsement, covering losses arising from the accumulation or run off of surface waters, to home policyholders who already have sewer backup coverage.

“On the property side, we are all looking at flood coverage after the announcement a couple of weeks ago,” Ince said Thursday. “We are assessing what this means. We have to look at the insurance cost and definitely look at our data around flood mapping and we recognize that we will potentially be looking at how those coverages work today. There’s more to come on that in the coming months.”

Ince also discussed the Ontario government’s private passenger auto insurance regulations.

In August of 2013, the ruling Liberals passed a law mandating “an industry-wide target reduction,” by 15%, of the “average of the authorized rates that may be charged by insurers” for private passenger auto, with a two-year target. Since then, Ontario auto insurers have been required to law “to propose rates and a risk classification system that contribute adequately” to that target, when filing rates with the Financial Services Commission of Ontario.

The 15% target was first introduced in the 2013-14 budget, in order to secure support of the New Democratic Party.

In its 2014-15 budget, the government noted that as of April 15, 2014 there had a total rate reduction of more than 5.6%, industry-wide, since August, 2013.

“While the progress has been achieved to date, further actions will be required to meet the average rate reduction targets,” the Liberals said at the time.

This spring’s budget for 2015-16 could include more auto insurance rate reductions, Ince suggested Thursday.

“Our understanding is likely an announcement around further rate reductions will happen with the budget,” she said in response to a question from the audience. “It’s probably not fair to speculate until we have some clear direction from them formally.”

RSA plans to spend about $300 million to update its computer systems, Saunders suggested.

“We decided on a complete modernization of our platform,” he said. “It’s a $300 million investment that will be a claims system, policy information and investments in broker tools, as well. To be a leading insurance company you have to have financial capital, you’ve got to have leading edge tools and in many cases not having those tools is a barrier.”

2015 Broker Event – Great job team RSA! #transformationaljourney #leadingchange @DonnaInce @ShariDouglasRSA pic.twitter.com/ObeQZfON12

— Allison Martin (@allygirl9) March 5, 2015