Could it be that Canadian auto insurers will ultimately be driven to adopt pay-as-you-drive insurance schemes once consumers learn how to say ‘Telematics?’
Rob Carrick wrote a piece in the personal finance section of the Globe and Mail last week, entitled “Car insurers just don’t get Generation Y”. Citing information from a recent J.D. Power report on consumer satisfaction in Canada, Carrick notes that while consumer satisfaction with auto insurers is up generally, there is a notable difference between Boomers and Gen Y: “Part of this relates to the fact that young drivers pay higher premiums, and part speaks to the fact that insurers are still doing business the way they did before the Internet was invented. Boomers may be okay with that because they’re used to it. Gen Y, quite rightly, questions this complacency.”
Carrick cites Lubo Li, a senior director at J.D. Power & Associates, who notes that insurers have not embraced the on-line world that many Gen Y citizens inhabit. We’ve written on this extensively, so we won’t beat that horse here.
What is interesting to us is Mr. Li’s follow up point: insurers lack flexibility in their products to take Gen Y consumers’ special requirements into account. Acknowledging that younger drivers do have a higher rate of claims generally, Carrick writes that “in bludgeoning every young driver equally on premiums, car insurers are making a good case for not owning a car and, thereby, avoiding the cost of insurance.” (We noted the trend away from car ownership in a post earlier this year.) Is the intent of insurers to help reduce market size? Probably not.
Carrick notes an alternative:
Mr. Li said there’s technology available that allows premiums to be personalized for all drivers, not just young ones. Insurers could have drivers install a remote-sensing device in their cars that notes the distance and speeds travelled. People who drive only a little and keep to the speed limits would be in a position to pay lower premiums after sending their data to their insurer.
In other words: Pay-As-You-Drive insurance based on Telematics. Why aren’t consumers demanding this? Probably because they don’t have the vocabulary. Yet.
And ‘yet’ may be the operative word. In July, we noted that there seemed to be increased ‘buzz’ around this topic; driven, in no small part, by the strong marketing thrust from Progressive in the US. Progressive’s commercials are on high rotation on shows that find their way to Canadian TVs (and iPads, and …..). And, as Li notes, “The insurer with the highest level of brand awareness is Geico, which doesn’t even sell insurance in Canada.”
So, our question to you: Will consumer demand be the critical factor in bringing Telematics-enabled personal insurance to Canada in a big way? Leave a note below.