Canadian Underwriter

Will telematics make territory-based rating a thing of the past?

July 24, 2018   by Greg Meckbach

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The use of telematics in pricing auto insurance is going to become more “prevalent,” and a major property and casualty insurer is trying to use the technology to get a better idea of driver risk, speakers said during a recent webinar.

Intact Insurance is trying to get beyond the use of proxies for determining risk in underwriting auto insurance, Jean-François Larochelle, director of Intact’s data lab, said during the July 18 webinar, Insurance Analytics to Supercharge Performance. Examples of “proxies” include rating factors such as the driver’s age, or where the vehicle is parked at night.

Telematics collects vehicle data such as distance travelled, where a vehicle was driven, as well as behaviours such as speeding, hard braking and sudden acceleration. “What we are trying to get [from telematics] is, are you a good driver or not?” Larochelle said. “The next question is, is [the telematics data] strong enough to remove all the other variables?”

In Ontario, auto insurers may base rates on territory (the street address of the vehicle owner or principal driver), age, gender and marital status. Some political parties took issue with territory-based ratings in the Ontario election campaign this past spring, but insurers say territory is actually one of the best predictors of claims frequency.

Ontario auto insurers may use telematics to give discounts for low-risk driving behaviour, but they may not impose surcharges for behaviour that they perceive as risky (frequently slamming on the brakes, for example).

Telematics “is going to become a really prevalent instrument for what I call real-time pricing and real-time underwriting,” Fernando Moreira, senior vice president of global insurance at Scotiabank, said during the insurance analytics webinar. “The old models for underwriting – they are, over time, going to become part of a museum.” The webinar was produced by Insurance Nexus, a unit of London-based FC Business Intelligence Ltd.

In addition to Intact, Canada’s largest insurer, telematics-based auto insurance is also available from The Co-operators Group Ltd., Desjardins General Insurance Group and CAA Insurance. CAA announced July 12 that its MyPace offering, which uses telematics to set auto insurance rates based on distance driven, is now available in Ontario.

CAA has been using what it calls “traditional” telematics for a few years. MyPace is different because it targets low-mileage vehicles and only uses distance, rather than other telematics-gleaned data such as time of day, hard braking and sudden acceleration to offer discounts. The target market for MyPace is motorists who drive fewer than 9,000 kilometres per year. Motorists start with a base rate and are charged in 1,000-kilometre increments, which are reloaded automatically.

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4 Comments » for Will telematics make territory-based rating a thing of the past?
  1. Jenny K says:

    Humorous that Intact is cited in this article. Their take on “telematics” is a cut rate app based model that is very good at one thing – infuriating customers. With reportedly horrible customer service.

    Cellphones are not the tool to run a telematics program on. The apps are unreliable, and Intact customers see their “discounts” disappearing based on buggy programming. (App reviews here:

    Companies need to pay more to get more with telematics and most won’t pay telematics device costs and canadian data rates. So customers get crap telematics and companies are also not getting good data to use. Maybe one day things will shift in canada but it’s not today.

  2. Bob says:

    I decided to enroll in the Intact program. Their app really is a very poor offering. I was heartened to read the link above to the reviews. This has been my very experience. Constantly it shows me driving through buildings and things and the telematics events are totally crazy. If this is all that insurance money can buy we are in real trouble! The data they are getting would be total garbage.

  3. Terry says:

    App based telematics is not a good solution for real data collection. It is widely known to be unreliable. It’s great as a gimmick if that’s what you are after. As a broker I have larger concerns with the Intact approach. They are trying to connect directly with my clients. That’s a non-stater for me. If they want to embed this in my client app (if they can make it less of a joke) I will consider these policies for my clients. Until then no thanks.

  4. Gerome says:

    The Intact program does seem to be a push to connect directly with my clients. Much like Client Centre. I don’t like this kind of thing. My perception is that it is underhanded. The app clearly has major issues. The reviews (online and from my clients) are really horrible. There is no customer service to go with it. The stories my clients have told me really has made me recommend this as a pass. I am not supporting it go forward.

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