UBI in Canada: What Canadian Insurers Need to Consider

Waterloo, ON (May 2, 2013) – While usage-based insurance (UBI) is quickly gaining traction in the United States and United Kingdom, there is also a history of UBI programs in Canada. Aviva Canada was in the market until two years ago, and Industrial Alliance is currently running a program in Quebec. That said, the tide has returned, and a number of insurance carriers are lining up to launch UBI programs north of the border this coming year.

To find out how insurance carriers should approach their UBI “go-to-market” strategy in Canada, we reached out to Blair Currie, Vice President of Marketing at Intelligent Mechatronic Systems (IMS).

Blair Currie, VP Marketing, IMS

MyConnectedCar (MCC): Blair, we’ve been hearing that Canadian auto insurers are becoming more interested in UBI. Can you elaborate on the recent surge in interest?

Blair Currie (BC): Up until last year, most of our business was in the United States. And the interest is rising to take US based programs to new levels. Before we were seeing pilot programs of 2,000 to 5,000 units, but now we’re seeing commercial roll-outs that involve tens of thousands of units. For example, one top 10 insurer is talking to us about launching in excess of 100,000 units. The business is about to tip in the US.

Canada appears to be catching on to UBI as well. We’ve had discussions with about a dozen Canadian auto insurance companies over the past six months. In fact, a handful are serious about launching UBI programs this year.

MCC: So what is driving all this interest on both sides of the border?

BC: There are some commonalities driving demand in both countries, including the lower cost of device technology and competitive pressure. But the US and Canada are at very different stages of development.

In the US, carriers are moving from pilots to commercial roll-outs and are starting to differentiate their programs. In Canada, the insurance companies are generally in the information-seeking phase, which means they’re learning from the successes of their counterparts in the US and Europe. Furthermore, the Canadian carriers are trying to leapfrog and develop new business models. It’s good to experiment in Canada, but carriers have to keep in mind the rules have yet to be set by the regulators.

MCC: Can you elaborate on the business models?

BC: The US seems to be focused mainly on price – meaning that most UBI programs offer a discount for good driving behaviour. But there are some new programs emerging, such as Young Drivers, a parent-teen coaching program that is quite different from other programs.

In Canada, we know of insurers who are not only talking about introducing discounts for good drivers, but are also considering higher premiums for poor drivers. This still has to be cleared with the Provincial regulators. But it is a different model. Canadian insurers are also looking into different technology models, such as using an OBD2 device with a Bluetooth link that uses the policyholder’s smartphone to transmit data to the Telematics Service Provider’s back-end.

MCC: Why the difference between the US and Canada?

BC: Sometimes there is a first-mover advantage. At other times it pays to wait. Both have their respective advantages and challenges and there are opportunities in both markets for innovative insurance providers.

MCC: If Canadian insurers are new to this business, who should they turn to for advice?

BC: Good question. In the early days of UBI there were very few players involved. So there were few choices. But as the market has grown, and there is evidence that the business will rapidly accelerate, many new and more sophisticated players are moving into this space. These players include business process consultants who park themselves at the top of most hierarchies of advisors. In turn, they want to drive the IT consultants and Analytics companies, who in turn want to drive the wireless, hardware, and software providers.

The problem with most of these new partners is that they lack experience in getting this technology into motor vehicles. For that, and many other reasons, the end-to-end Telematics Service Provider is probably the most important player in the market for companies starting UBI programs because they have the know-how to get results from the program.

MCC: Okay. Please tell us more about this know-how and results.

BC: It is only through experience that you can advise an insurance carrier of what works and what doesn’t. To start, what type of team should a carrier assemble to run a UBI program? Should it all be outsourced or what should be run internally?

Having worked with eight of the top twenty-five carriers, we’ve learned that it’s better for an insurance company to outsource most of the UBI to ensure that it remains focused on its customers. That’s because UBI solutions are so linked to Connected Cars and Mobile and the insurance provider does not tend to have these skills.

While an insurance company should outsource most of its UBI program, it should also retain an internal team devoted to UBI. We’ve also learned that the most successful programs need a commitment from the C-Suite and not just the VP level. UBI is a commitment, not a campaign, and only the CEO, CFO, or Chief Investment Officer can secure this kind of long-term commitment. Further, the team should contain representatives from all functions of the insurance carrier versus a few, dedicated individuals.

This insight can only be gained through direct experience.

MCC: Tell me what exactly does a Telematics Service Provider do?

A good TSP delivers a complete solution that allows its insurance partner to concentrate on what it does best – provide the best experience to its customers. I’d look at the TSP’s deliverables in terms of a hierarchy, starting with business know-how as the base delivery. It knows what to do and can be the guide that helps a carrier avoid the land mines associated with UBI.

It also can consult on the business models, how to get up consumer adoption and the ways an insurer can differentiate its program. This is particularly necessary for those with domestic and international experience. But mostly it knows how to manage data and turn this into intelligence and decision-making ability through analytics, visualization and insights into driving behavior.

To provide a technological solution to gaining insights and intelligence, a Telematics Service Provider is worth its weight in gold. After all, who understands the technology, and its strengths and limitations, better?

MCC: Thanks again, Blair.

BC: Thank you.

Free UBI Boot Camp Webcast

For more information on UBI in Canada, IMS is offering a free, online UBI Boot Camp.

IMS UBI Boot Camp webcast – to ensure your organization is ready to successfully tackle and harness the power of UBI. Watch now.

About IMS

Intelligent Mechatronic Systems Inc., based in Waterloo, Canada, is a global leader in Telematics and Infotainment, including the convergence of both technologies in delivering the ultimate Connected Car experience. For more information, please visit www.intellimec.com.

Source: Intelligent Mechatronic Systems Inc.