With 81% of polled Canadians yet to try UBI, brokers have opportunity to educate and sell

While usage-based insurance (UBI) has been around for nearly nine years in Canada, a new survey shows only 57% of Canadians have heard of UBI and 81% of those surveyed have not tried it – presenting an opportunity for brokers to educate consumers and sell them a money-saving product.

The survey by Ratehub.ca, which polled over 1,300 Canadians with auto insurance, found 41% said they would consider UBI due to the pandemic, and 15% have tried to participate in the program.

Looking into the reasons behind UBI’s low uptake, the survey found that while 57% of drivers said they’re interested in UBI to save money, more respondents (77%) are concerned about potential rate hikes.

Meanwhile, 67% expressed concerns about program accuracy, 56% said they worried about privacy and 51% were concerned it would negatively affect their current rates.

The survey also showed younger drivers aged 18 to 34 are more likely (70%) to see value in UBI compared with older groups (56%). One reason for this, the survey noted, is that car insurance rates generally go down at age 40.

Digitization and technology impact

The pandemic accelerated digitization trends in the insurance industry, underpinned by rapid technological change . This drove consumers to rethink how they buy insurance and which products and services they want or need.

That’s forced the industry to reconsider the ways it meets consumer demands.

Globally, a recent study by Valuates Reports shows UBI’s growth has been driven by adoption of smartphones and connected devices. And the study projected the global UBI market will reach US$77.25 billion by 2026, from US$25.46 billion in 2020.

Uptake in the app-based UBI market has also grown alongside surging demand for electric vehicle applications that let customers connect smartphones to their cars to test the car battery, according to Valuates Reports.

In response, it added, Canadian insurers are incorporating UBI into both personal and commercial lines.

What to tell your clients

‘The good’

Customers can save up to 30% per year on their auto insurance; telematics and UBI lets customers take control of their policies, opting for pay-as-you-go or pay-how-you-drive options.

While older drivers may see lower premiums since more data is collected over time, most companies offering UBI provide a lower rate to both new and experienced drivers.

Beyond saving money and the convenience of using a smartphone app, Valuates Reports said UBI reduces the risk of accidents and vehicle theft. Telematics track driving behaviour and can be used to locate missing or stolen vehicles via GPS.

‘The bad’

Clients need to know that, since last November, the Financial Services Regulatory Authority of Ontario (FSRA) is allowing insurers’ UBI programs to apply a surcharge for risky driving behaviour – which will impact their coverage.

Talk to clients about how UBI programs and scoring works; and tell them what they can expect from the app they’re considering using.

‘The ugly’

It’s not surprising that privacy and accuracy are top concerns for customers exploring UBI.

New technology trends have spiked privacy concerns for most people as awareness around data collection, uses and protection soars. And FSRA has said your clients need to provide consent to their insurer to use and disclose their personal information.

Brokers should encourage customers to read the fine print and know what information is collected, how it will be used, who has access to it and whether they consent to sharing that data with a third party.

Feature image by iStock.com/miodrag ignjatovic