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What Did We Learn Today, Dorothy? Aviva Restarts Telematics Program

The most serious mistake a company can make is to fail to learn from its past mistakes. Aviva is demonstrating that it takes that old adage to heart. The insurer has reentered the telematics based insurance market in the UK, with some very interesting elements, showing that Aviva spent some time learning from its own mistakes as well as the mistakes (and successes) of others.

Our question:  Will this encourage Aviva Canada to bring forward a revised ‘Autograph’ program?

The background …

In 2008, Aviva, through its Norwich Union subsidiary, folded its telematics-based insurance program due to lack of interest.  This was widely cited as evidence that usage-based insurance (UBI) was a non-starter.

At roughly the same time, Progressive Insurance restarted its own UBI offering with the ‘Snapshot’ brand.  Progressive had a similar uptake challenge, but addressed it by making its program more user friendly, and setting its ebullient ‘spokeswoman’, Flo, on the case. with perky, cheeky marketing, including a free trial period.  By most accounts, Progressive has come to dominate the personal insurance telematics space in the US.

So what’s changed?

Aviva’s new offering has some of the same elements as Progressive.  In  August of this year, it offered a trial program to users which allowed the consumers and the company to test the value of the program in their own cases and to shape the final components of the program.

In addition, Aviva’s model uses the driver’s mobile device to track usage with a ‘RateMyDrive’ android app (as opposed to a device embedded in the vehicle).  While there are trade offs in the amount and type of data that can be collected. the mobile device approach offers an easier adoption for a large number of users, according to Jonathan Burdett, a director for PwC in the UK, cited in Insurance & Technology.

The timing is good, as well.  Shortly, the EU directive banning the use of gender in insurance underwriting  will become effective, putting upward price pressure on automobile premiums for women.  Joe McPartlan, Motor Underwriting Manager, QBE Ireland, recently wrote, “(u)sing Telematics to set premiums according to customers’ risk profiles allows the industry to keep offering lower prices to most women while staying on the right side of the law.”

Is Canada on the expansion list?

We wish Aviva well with its offering in the UK.

We wonder whether this will drive Aviva Canada to follow suit.  In 2005, Aviva Canada was the first Canadian insurer to introduce a telematics based automobile insurance scheme.  It was subsequently withdrawn in 2011.

Will we be seeing a revival here as well?  What do you think?

 

2 Comments

Blair Currie

Is Canada on the expansion list?

I think that this post is interesting but the thinking might focus unnecessarily on one carrier, in that the lessons of UBI – from Canada in years past, the United States, UK and Europe, are already there for all to see. The market is changing quickly and a number of other insurance carriers in Canada, are sensitive to the changing winds.

The first possibly change is that there are hints of legislation requiring insurers to offer UBI as an alternative. Governments and regulators are looking to other markets where UBI is sometimes legislated as an alternative, as it is in Texas. Providing tax payers with an option to lower insurance rates is a sure vote getting so this type of legislation is surely coming.

The second motivation for insurance carriers to enter this field in Canada is to gain a competitive advantage. UBI can give insurers a better book of business by attracting better drivers. Forward thinking carriers know this and are now looking into programs on this side of the border.

Third, and related to the point above, is the competitive pressure. Canadian insurers know that the foreign based insurance companies such as Aviva, Allstate and State Farm have programs abroad and they are able to take that learning across the pond or north of the border into Canada. The purely Canadian insurers do not want to lose on their home turf.

The fourth consideration is that the business models for UBI are starting to make more sense. Device costs have come down significantly and there are a number of end-to-end solutions providers who can run complete programs at much lower costs than the pioneers of UBI faced. This makes it a more palatable alternative that the early UBI players faced.

Fifth, UBI can now support a number of business models and segments – from helping determine price as the Progressive model shows to using the same telematics device to running a young drivers program to sharing data with drivers and develop more of a relationship with policyholders.

As a Telematics Service Provider (TSP) IMS pretty certain there will be a number of insurance players start UBI programs in the near future in Canada. So yes, there will be a revival here. And the smart insurers will take lessons from Aviva, Progressive and the other players in play. With experience in dealing with 8 of the top 25 auto insurance carriers in the US, we’re gearing up for it.

Reply
Blair Currie

Is Canada on the expansion list?

I think that this post is interesting but the thinking might focus unnecessarily on one carrier, in that the lessons of UBI – from Canada in years past, the United States, UK and Europe, are already there for all to see. The market is changing quickly, and a number of other insurance carriers in Canada, are sensitive to the changing winds.

The first possibly change is that there are hints of legislation requiring insurers to offer UBI as an alternative. Governments and regulators are looking to other markets where UBI is sometimes legislated as an alternative, as it is in Texas. Providing tax payers with an option to lower insurance rates is a sure vote getting initiative, so this type of legislation is surely coming.

The second motivation for insurance carriers to enter this field in Canada is to gain a competitive advantage. UBI can give insurers a better book of business by attracting better drivers. Forward thinking carriers know this and are now looking into programs on this side of the border.

Third, and related to the point above, is the competitive pressure. Canadian insurers know that the foreign based insurance companies such as Aviva, Allstate and State Farm have programs abroad, and they are able to take that learning across the pond or north of the border into Canada. The purely Canadian insurers do not want to lose on their home turf.

The fourth consideration is that the business models for UBI are starting to make more sense. Device costs have come down significantly and there are a number of end-to-end solutions providers who can run complete programs at much lower costs than the pioneers of UBI faced. This makes it a more palatable alternative that the early UBI players faced.

Fifth, UBI can now support a number of business models and segments – from helping determine price as the Progressive model shows to using the same telematics device to running a young drivers program to sharing data with drivers and develop more of a relationship with policyholders.

As a Telematics Service Provider (TSP) IMS is pretty certain there will be a number of insurance players start UBI programs in the near future in Canada. So yes, there will be a revival here. And the smart insurers will take lessons from Aviva, Progressive and the other players in play. With experience in dealing with 8 of the top 25 auto insurance carriers in the US, we’re gearing up for it.

Reply

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