- Where Insurance & Technology Meet

UBI and Brokers: Ticket to Ride or Highway to Hell?

By all accounts, telematics-enabled usage-based insurance (UBI) is making  steady progress in the Canadian insurance market.  In spite of active leadership by several broker associations, there does not seem to be consensus among front-line brokers as to what role they should, or could, play with new product and service models driven by UBI.

We’re wondering how long brokers can refrain from making some fundamental decisions about this new approach to automobile insurance — and what the consequences will be.

The progress of UBI in Canada…

Over the past year, the number of insurers offering some form of UBI has gone from one (in Quebec) to a handful (with three in Ontario).  This is far from being a groundswell.  However, there are a number of  insurers actively investigating the options,  and telematics suppliers we have spoken with seem genuinely sanguine about prospects.

All in all, analyts suggest that Canada will likely follow an adoption pattern similar to that of the US, which experienced a slow start, but with a fairly quick ramp up now underway, there will likely be a penetration rate of 25%-30% of the personal automobile insurance market in the 2025 time frame.

So where is the broker in this?

At this point, none of the active UBI insurers are broker companies.  However, we are aware of several broker companies that are actively developing programs.  What we are not hearing is a unified chorus of front line brokers singing from the Telematics song book.

Back in October, the Insurance Brokers Association of Ontario announced that it’s subsidiary, the Independent Broker Resources Inc. (IBRI), had entered an partnership with Quindell Portfolio Plc, a leading provider of insurance technology, “to introduce ground-breaking telematics technology to the Canadian marketplace.  The partnership will launch a broker owned telematics solution.”

Much work had been done to ensure that the broker would be in the driver’s seat (pun intended).  The Ontario government issued guidelines that supported the structure and function of the enterprise in data utilization.  Several insurers indicated they were actively considering participation.  It sounded like all the pieces were in place to let the brokers take control of the ride of a lifetime.

Then things went silent.

What’s happening here?

We’ve had a couple of conversations with leaders in the broker community that suggest that the grass roots brokers simply have no awareness of the potential impact of UBI on their business and have no interest in gaining awareness.  Or maybe, they have no cycles left over to invest in gaining awareness.

With a continuing soft market, and increasing demands for growth by insurers, many brokers are stretched beyond any reasonable limit.   For some brokers, long term planning is what crisis to handle after lunch.

Our contacts are quick to point out that they believe an education campaign is in order.  And there are several initiatives underway (ORBiT Education Days will feature a session on Telematics UBI).  But if the students are overwhelmed, can any teacher make an impact?

UBI becomes collateral damage; The enigma becomes a conundrum …

If this is the case, then the broker may be right to give UBI a pass.  Blair Currie, Vice President Marketing, Intelligent Mechatronic Systems Inc., who supplies telematic technology and services, points out that to play in the UBI game, brokers have to keep up with a differences in plans, new regulations, and consumer technology requirements.  (We blogged on some of these elements last September.)  All this for about the same commission that is coming in now.

Unfortunately, if UBI becomes an important alternative for personal automobile insurance, the broker who leaves UBI off the table becomes disadvantaged relative to direct writers or other brokers who have the resources to offer the option.

What do you think?

If you are a broker, are you moving to be prepared to handle UBI?  If so, how much time/energy/money is required?  If not, what do you think this will mean for your personal lines business.

One Comment

Blair Currie

Interesting post.

As a telematics services provider IMS sees a number roles for brokers with telematics and are happy to work with broker associations or innovative brokers who want to both shape the telematics programs of insurance companies and venture into telematics themselves – for we’ve seen innovative brokers pursue both these paths.

The trick with broker associations is to revisit telematics from an ecosystem perspective where the brokers, insurance company and policyholders all win. The failure to do this is why “things went silent” in the example you raised. We see a way to revisit this model in a way that all parties should theoretically win – giving the program much more chance of success.

For innovative brokers we can see program where telematics is more than just price and is very much about strengthening relationships and good social responsibility. By using the telematics data a broker can provide real value to policyholders by making them safer (especially teens), smarter (better drivers) and greener (saving money through better use of the vehicle as well as reducing your carbon footprint). This value will not only solidify the broker within the value chain but retain the advantage over those direct writers who are using telematics.

For curious brokers we’re willing to help.

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