The Canadian UBI market is at a tipping point, as an increasing number of carriers begin to appreciate the benefits of offering a telematics insurance solution and consider how best to offer their product. In this third and final look at the deployment and challenges facing UBI, Siegfried Mortkowitz of TU Automotive looks at the options they must consider.
Colin Wright, principal at Corner Two Consulting, suggests that possibly as a consequence of the regulators’ prudence on data, the half-dozen or so carriers who now offer UBI use the OBDII device (on-board diagnostic system) exclusively. While this solution pleases the regulators, because of the quality of data it gathers, it is not quite foolproof.
“OBDII doesn’t tell you who’s driving the car,” he says.
He sees another value for the insurer in the smartphone besides cost savings: its use as a marketing tool. As an example, Wright cites the recently launched Test Drivewise app from
Allstate Canada, which allows consumers to record their driving and have their driving behaviour rated on the basis of such data as speed, braking, and the time of day that they drive before they decide whether or not to purchase a policy.
Christopher Dell, senior director, Product Management & Development, at Intelligent Mechatronic Systems (IMS), the TSP that provided the UBI solution for the Co-operators, agrees.
“The smartphone’s data collection capability is a cost-effective presentation unit,” he says.
He says his company offers a UBI discount app with its DriveSync connected car platform that allows insurers to collect driver behavior data and show the driver his rating before he signs with the carrier.
This has another benefit, for both carrier and consumer, in that “it is a great mechanism for the consumer to experience (data gathering) and, if comfortable with it, to proceed,” making it an easier sell. (continued.)
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Carriers can also use the smartphone as a market research tool, says Dell, by running pilots in regions or provinces, thereby collecting information on interest in a UBI product there.
“And when they find sufficient interest, they can then fast-track their entry into that market,” he says.
The smartphone-based UBI product can also offer a more effective CRM solution for the carrier than a port-mounted device, he says.
“People are used to their cells and they can use it to interact on social media,” says Wright.
As part of its solution, IMS also offers gamification services in its app, allowing potential customers to compare their driving ability with a cohort and earn “badges” by, among other things, displaying safe driving skills. The drivers can then share their app experiences and achievements via social media. This offers a double benefit by functioning as free publicity for the carrier and turning the UBI solution into part of the driver’s daily lifestyle.
“Mobile may be a more effective way to reach a certain market segment,” says Dell. “It is a stickier solution.”
He also rejects the notion that it is easier to cheat with a smartphone than the dongle.
“You can always pull the (OBDII) device out of the car,” says Dell, adding that his company offers analytics around the mobile phone for suspect behaviour.
“Our DriveSync platform has an administrative portal that looks for behavior that an insurance company may want to follow up on,” he says. “We don’t want to provide technology without the tools to manage it.”
But this does not resolve the issue of the quality, consistency and reliability of the data gathered by the smartphone, an important issue for Canadian regulators. A hybrid solution—which uses an OBDII device to gather data, transmit it to the customer’s smartphone, which then sends it to the back end— offers the best of both devices, data quality, cost-effectiveness and stickiness.
“This ensures the quality and consistency of the data while offering cost savings from data transmission,” says Dan Maddison, director of market research and development at the Co-operators.
Wright calls the hybrid an “excellent solution, because it drives costs out of the model and shifts the costs to smartphone customers.” He adds that Canadian insurers just coming to the UBI market “have got to squeeze it at both ends: drive costs out and find other sources of revenue,” such as value-added services.
However, he says value-added services are a difficult sell in Canada because consumers just coming to the solution because of the premium relief it offers may not be eager to spend more money.
But Dell argues that the hybrid solution is not the Holy Grail everyone believes it to be, because it is not trouble-free. (continued.)
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“The OBDII is cheaper because you don’t have a cellular chipset and you are not paying for the data transmission, but the Bluetooth dongle and smartphone connection is a potential friction point,” he says. “It may create gaps in data transmission if the Bluetooth dongle and smartphone ‘unpair.’”
In addition, if the Bluetooth dongle needs a software update, it may require that it is first downloaded to the phone.
“It adds a lot of complexity to the solution,” he says.
Dell sees the Canadian UBI market at an important turning point.
“The OBDII is now viewed as the gold standard, but there is a lot of mobile coming up. There’s a lot of interest,” he says.
The Co-operators’ Maddison is very optimistic about the future of UBI in Canada.
“Consumers see it as a much more fair option and they are getting more comfortable with sharing personal information, while on the insurance side cost-effectiveness is going to be a big factor that everyone will look at closely” he says. “If the cost is in a good zone and consumers feel comfortable with it, it will take off.”
