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Telematics/Usage-Based Insurance: Where Do Canadian Brokers Fit?

Since Desjardins’ May 13th launch  of Ajusto – a Telematics enabled Usage Based Insurance (UBI) product – there have been active discussions about how independent brokers in Canada could fit in as distributors of this type of product.  We think that brokers have a unique opportunity to define the future for themselves and their customers if they can look at the big picture.  We’d really like your thoughts on this.

How Brokers Think About Their Role …

A recent discussion on the LinkedIn Canadian Insurance Broker Strategy Group offered the following comments from brokers:

  • “The next generation telematics has the ability to be a game changer… we (brokers) run the risk of falling behind times to our detriment.”
  • “I really have to wonder whether telematics will prove useful over the long term or become a passing fad. What happened to the Aviva trial?”
  • Telematics won’t change driving behaviour overall, and some drivers will be penalized to enable others to get discounts.
  • Are or should Brokers have the ability to view the Telemnatics data”
  • “How does Telematics fit into the rating regulations in many provinces? Don’t all these discounts have to filed and worked into a rating scheme, or do they hybrid it with the existing class/dr system?”

We believe that virtually all of these comments (except for the first) miss the big picture.

What’s The Big Picture?

Here’s the big picture from our perspective: Given this is a new and rapidly evolving environment, brokers can fit in wherever they want if (and this is a big if) they can get together with enough critical mass to define the future.

Consider:

  • Canada is just restarting its implementations.  At present, the insurers are direct writers.  However, one doesn’t have to go far to find broker companies in serious discussions about starting.
  • In the US, the acknowledged leader in UBI implementation is Progressive, which distributes through independents and directly.  In reality, it has a penetration of less than 20% of its potential auto base.  Direct writers and Agency companies are coming on quickly.
  • In the UK (a more mature market for UBI),  IT supplier SSP has partnered with Wunelli, a leader in telematics technology to offer a “mass market” UBI programme for independents.

Our belief is that the pioneers are defining the future of UBI on a regional basis.  In Canada, brokers are still major players and, if some or all of them can come together in partnership with some leading insurers, they could define a future which meets the needs of the brokers and their customers.

This will require some education, some time, and some creativity.  But, if UBI is the way of the future for a significant portion of the marketplace (and we believe it is),  this is an investment in protecting current market share and potentially expanding.

The alternative is to wait for others to define the role of the broker on their own.

What Do You Think?

Is UBI a future direction in Canada?  If so, should brokers have a role? And, if so, do brokers have the interest and energy to create the future?

3 Comments

Reeder

Customers that prefer to deal with a broker should have the option to choose a UBI solution offered by their broker. Brokers waiting for an insurer to come to their rescue with a market ready UBI program may have to wait for some time. Perhaps a “mass market direct model UBI platform” created exclusively for brokers would be the answer. A quote aggregator such as kanetix.ca, Insurance Hotline or InsuranceHunter.ca could provide a point of sale/fulfillment partnership that would be available to all brokers.

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Harrison Michael

I’ve mentioned it before, companies don’t want to talk about it and brokers are afraid of it – COMPENSATION. There has to be a fundamental realignment in how and for what commissions are paid.

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Blair Currie

Technology has a tendency to disrupt markets and automotive technology will certainly disrupt the auto insurance business. On the one hand, telematics and driverless cars (one is a subset of the other) will result in less auto insurance because they will converge and ultimately reduce the number of accidents on the road.

Similarly automotive OEMs will be drawn to the auto insurance space because they take on more liability with each safety feature they add to their vehicles.

Smart brokers will “Skate to where the puck is going to be” (please excuse the mixed metaphor) and use this technology to their advantage. This will be in offering their customers telematics as an option and in siding with automotive dealers where telematics could benefit both insurance and dealer relationships by communicating vehicle health and helping with preventive maintenance.

I think there is great opportunity for those who get ahead of technology and risks for those who don’t. As such it may be a chance for an independent broker to gain ground over other brokers.

And in time when telematics data will become more portable then those who understand it will be able to shop around their customer’s data to get the best rates.

So there are both immediate and longer term opportunities for independent brokers with telematics and other forms of automotive technology.

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