Partnerships between telematics providers and insurance companies are becoming increasingly popular, with insurers like CAA launching their own auto insurance programs based on drivers having telematics devices installed in their cars.
While these solutions are helping to meet different consumers’ needs around car insurance, such as pay-as-you-go options for those that drive less, there is also room for improvement in this evolving telematics-enabled landscape.
Read more: Ontario gets pay-as-you-go auto insurance
“I think telematics could be crucial, especially in an environment where consumers are not happy that their car insurance rates are going up and, at the same time, insurance companies are not happy with their loss ratios. Solutions need to be put forth that can help both parties feel better,” said Justin Thouin, co-founder and CEO of LowestRates.ca. “I think telematics is a large opportunity because with telematics, if you’re a good driver you can pay substantially less for your insurance.”
Some might think that drivers paying less isn’t good for insurance companies since they’d be generating less profit in what is already an unprofitable insurance marketplace. To add insult to injury, the Financial Services Regulatory Authority of Ontario (FSRA) recently approved several auto insurance rate adjustments for the year, which means drivers in the province could pay as much as 11% more for coverage. FSRA approved the rate increases of some 20 insurers and, according to the regulator, approved rates will increase on average by 1.56% when applied across the total market.
Telematics solutions could help ease the pain of both insurers and insurance customers in this tough environment.
“What’s interesting is that for those consumers that choose telematics, the loss ratios for the insurance companies are far, far better than those that don’t choose telematics,” explained Thouin, adding that telematics use among drivers is one of the largest indicators of a positive loss ratio for insurance companies. “The more people do use telematics, the better for both the cost of insurance for consumers and also for the loss ratios for insurance companies.”
Read more: What do consumers want from auto insurance?
In order for consumers to more widely use telematics devices, the insurance industry still has some work to do around education, and the devices themselves need to get easier to use. Thouin pointed to one company that advertises pay-as-you-go insurance, but requires that drivers implement a telematics device in their cars, which many people aren’t keen on doing. Meanwhile, another company has a telematics app that drivers only need to use for six months before seeing the benefits of the technology.
“The easier they are to use and the more user friendly they are, I think the better penetration telematics will generate,” said Thouin. “It’s something where there needs to be an education to consumers about what telematics is or isn’t, because the average Canadian doesn’t know it exists. And among those that do know it exists, they don’t know actually how easy it can be to save money.”
