October 1, 2015 by Canadian Underwriter
The potential benefits of usage-based insurance (UBI) – including safer driving behaviour – have long been touted, but survey results released Wednesday by Allstate Insurance Company of Canada show consumers have not necessarily bought into the value of a UBI program.
Conducted by Leger on behalf of Allstate Canada, the online survey found that significant confusion exists among respondents about the potential benefits of UBI – which involves in-vehicle telematics devices measuring driver habits, such as hard braking – the impact of in-vehicle telematics on insurance premiums, and how auto insurance companies handle the participant privacy and data.
The quantitative online survey involved 1,456 Canadians, with field work done in August using Leger’s online panel, LegerWeb, notes a statement from Allstate Canada, which produces and distributes home and auto insurance products, including UBI. The company notes that many Canadians have embraced new automotive technology offerings because of perceived benefits, but this has not extended to UBI, which can lead to lower premiums reflective of driving habits.
That skepticism may be having a negative impact on UBI’s adoption, Allstate Canada reports, citing some misconceptions among respondents on advanced auto insurance options.
Survey results show just 41% of respondents report they feel the biggest potential benefit of participating in a UBI program would be earning a discount on their rates, while 34% of those polled do not see any potential advantage.
With regard to perception on how UBI can influence insurance rates, the survey reveals 26% of respondents say they feel their rates could increase, 26% feel their rates could decrease, and 31% feel their rates would remain unchanged.
Calling UBI an opportunity to showcase how safely an individual drives, “people can learn more about their driving habits and, if you demonstrate you’re a safe driver, you may end up with a reduced rate,” Ryan Michel, senior vice president and chief risk officer for Allstate Canada, says in the company statement.
Citing a clear gap in understanding the purpose of a UBI program, Michel emphasizes “enrollment in a UBI program won’t result in a rate increase.” He adds in in a blog post that the safest drivers can end up with discounts of as much as 30% off premiums.
“The programs are built so that a customer’s premium will go down, or at worst remain the same; a customer won’t get an increase as a result of participating in a UBI program,” Michel writes in the blog. “For example, in Ontario, provincial legislation states that our programs ‘should collect and use UBIP [usage-based insurance program] data solely for discount-setting purposes, and not to decline, cancel or refuse to renew risks,’” he adds.
With regard to data collection and privacy, Allstate Canada reports that, here at home, all UBI programs must go through a regulatory process before being introduced to a market and must ensure all personal information collected is in line with Canadian privacy legislation.
Still, 46% of those taking part in the survey report they do not feel auto insurance providers will keep their data private, and 65% say they are concerned that their providers will track their locations if they opt into a UBI program.
“Usage-based insurance programs are relatively new in Canada and with any new technology, there are going to be questions about how it works,” Michel says. If a person does not like the idea of his or her location being collected, for example, “you may want to consider a usage-based insurance offering that doesn’t collect location data.”
Michel writes in the blog, “In fact, we are governed by legislation that prohibits these occurrences from becoming part of the conversation about your rates. Taking it one step further, government policies fully state the application of your data in claims-related process (for example, reporting a fender bender) are not permitted.”
In addition, when a person is enrolled in a UBI program, “laws and privacy regulations ensure that your information stays with your provider and that they cannot make customers consent to collection, use or disclosure of personal information beyond what’s required by the UBI program as part of their participation,” Michel notes.
Drivers looking to take part in a UBI program should consider a number of things, including if he or she is a good candidate for a UBI program (for example, driving habits and how frequently one drives); how the company will use his or her information (what information will be collected and how it will be used); if the program tracks driver location; and if multiple drivers will be using the vehicle in question.