Ontario motorists who choose usage-based insurance could now be hit with surcharges if telematics data shows they have risky driving behaviour.
The Financial Services Regulatory Authority (FSRA) removed its UBI Guidance this past November, a FRSA spokesperson told Canadian Underwriter Thursday.
“Good drivers will be rewarded with lower rates. Drivers with high-risk driving habits may pay more,” the spokesperson wrote in an email.
So this means that auto insurers using telematics are not restricted to discounts only.
With telematics, the insurance company measures behaviour such as sudden acceleration, hard braking, speed, and time of day. The insurers can use either a device plugged into the vehicle diagnostic port or an app that the driver installs on their wireless cellular device. Some app-based UBI products also track whether clients are making calls or texting while driving.
In the past, some industry experts have said the lack of surcharges has been one drawback of telematics-based auto insurance.
“If you want to truly improve driving behaviour, you have to penalize bad behaviour,” George Cooke, president of Martello Associates Consulting, told Canadian Underwriter in early 2014. Cooke, a past CEO of The Dominion of Canada General Insurance Company, was interviewed in 2014 shortly after Desjardins, The Co-operators, Intact, and CAA launched their telematics offerings in Ontario.
“With a surcharge, all of a sudden this device has economic incentives that can go both ways. You can change behaviour. That lowers the total cost. The politicians will catch on to it sooner or later, and when they do, they will force it,” Cooke told Canadian Underwriter in 2014.
UBI pricing models are designed to price customers more accurately based on their driving habits, the FSRA spokesperson told Canadian Underwriter Feb. 4, 2021.
If an Ontario auto insurer wants to change its UBI model, such as adding a surcharge, the insurer needs to propose that to FSRA in a rate filing.
“FSRA continues to review and approve the terms and conditions of UBI programs to ensure they clearly explain how the UBI score can affect the premium,” the regulator’s spokesman told Canadian Underwriter. “UBI models must be approved by FSRA and continue to meet statutory standards.”
The Travelers Companies Inc. recently introduced its IntelliDrive UBI mobile app in Canada, said Michael Klein, president of personal insurance for New York City-based Travelers, during a recent conference call discussing Travelers’ financial results for 2020.
Chris Cornell, national sector leader for insurance at KPMG Canada, told Canadian Underwriter earlier how brokers can use telematics data to advise their auto clients.
“It is conceivable that a broker would look at driving data on a client, gleaned from telematics, call the customer, and say something like, ‘If you change your driving behavior this way, you might get an opportunity for a better discount,’” Cornell said in an interview in early 2020 about major technology trends in P&C.
“If driving patterns or things of that nature are available to you from a carrier, having better access to that information can provide the broker with a better opportunity to improve the underwriting experience for the customer and also make them more aware of how the customer behaviour is potentially driving their underwriting experience and ultimately the premiums on the policy,” Cornell said in early 2020, commenting in general.