Telematics gives brokers opportunities to offer advice but may need a ‘disable creep stalk’ function

Telematics is going to change the way auto insurance is offered, and the technology gives brokers plenty of opportunities to offer advice to consumers, according to speakers at Thursday’s P&C Crystal Ball conference who are using pilot versions of the technology to monitor reports on their own driving habits.

“Telematics is going to change everything,” said Alister Campbell, chief executive officer of The Guarantee Company of North America. “Taken to its logical extreme, the usage based insurance model is no longer insurance.”

He made his remarks during a question period at P&C Crystal Ball, which was organized by CW Consulting (formerly known as Cookson Walker) and held at the International Plaza Hotel in Toronto.

“Insurance is the pooling of a group of people with shared characteristics and then you use the previous performance of those people with shared characteristics to guess how they might do something in the future that involves some form of risk, like a car crash,” Campbell noted.

But the “full extreme version” of usage-based insurance, Campbell added, is “basically a utility. It’s how you drove, how far you drove and what kind of events happened while you were driving, week by week and month by month.”

The role of the broker, Campbell said is “not clear” to him, but the CEO of a major broker association did offer some clarity.

“Telematics is going to change our world in 2014,” said Randy Carroll, chief executive officer of the Insurance Brokers Association of Ontario (IBAO). “You have to … help the consumer understand that product and in order for them to understand that product, you have to understand … how it works. It actually affords you the opportunity to go back to the basics of underwriting, from a different perspective, and become an educator for the consumer versus having the conversations that you have had over the past two years, talking about black box underwriting, having no idea how the policies have been underwritten, or rates have been determined.”

Carroll added brokers can advise consumers as to how they can improve their risk.

“You can also have a great conversation, advising them as to whether they should move to that type of product offering or whether they should stay within the traditional model,” he said, noting IBAO executives have been beta-testing telematics.

“I would massacre myself if I moved over to a telematics,” he said. “Out of whole test group, I am the person with most frequency and severity of braking.”

Campbell is also involved in a telematics pilot, involving 30 members of The Guarantee’s senior management team and board.

“A lot of my dangerous rating on the pilot we are doing is because I am not driving 100 (kilometres per hour) on (Ontario Highway) 401,” said Campbell. “I’m going to want a usage-based pricing model but I want one that recognizes my characteristic of 30 years with no accidents. Even though I drive a little bit above the speed limit I think there will be lots of people like that and there will be lots of companies who will be very hard-nosed in their modeling and less sensitive to those differences.”

Cambell added different carriers will have different rating models when using telematics to assess risk.

“I can assure you the actuaries do not have consensus on that,” he said. “In that environment, there’s a lot of room for advice on which box to use, which company’s model might fit with a certain type of driver.”

Campbell shared some other of lessons he has learned in the telematics trial.

“I was able, to track, in a weekly report, my wife doing 57 over the posted limit .. coming off (Ontario Highway) 409 on to the entrance into (Toronto) Pearson  (International Airport),” he said. “The speed limit goes from 100 to 90 to 80 to 60 to 50 in about 10 feet and there is always a cop there. You can spot those kinds of things. They are interesting but a bit creepy.”

Campbell also discovered a function that lets users determine the last reported location for their vehicle and he brought the house down with his anecdote.

 “I clicked on it and there she was, parked, on Fairlawn Avenue, just off Avenue Road,” he said when checking his wife’s location.

“Two days before Christmas, probably shopping, but maybe that’s where her boyfriend lives,” he quipped. 

But in all seriousness, Campbell suggested insurers offering telematics will need to take this into consideration.

“You realize you will probably have to have a ‘Disable household creep stalk’ function,” he said. “Has anybody thought about that one yet? Because I think the winning companies will.”