The Canadian Usage Based Insurance 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. Siegfried Mortkowitz of TU Automotive looks at the options they must consider, in the second of a three-part series examining UBI deployment in the Canadian market.
A number of Canadian insurance companies are now putting a UBI program in place or considering it and are therefore faced with the crucial question of what device to use to gather and transmit driver behaviour data: OBDII, a smartphone or a combination of the two.
The key factors they must weigh in coming to a decision are cost, data quality and ease of use for the customer. Each of these solutions has advantages and drawbacks, and whatever the decision, there will be a trade-off. That wasn’t the case two years ago, when the Co-operators was investigating options.
“We were one of the first (Canadian insurance companies) to offer UBI,” says Dan Maddison, director of market research and development at the Co-operators. “When we started, there weren’t many options besides the dongle. That was the predominant option at that time. A new company coming in today will have more options.”
An issue with an OBD2, he explains, is the cost of the device, which is borne by the carrier. However, “the data collected is better and more consistent than the smartphone and it is plugged in all the time. It stays with the vehicle.”
With the smartphone, on the other hand, “you could be traveling in another vehicle, or even a taxi, or walking,” he says.
In addition, Maddison continues, the OBD2 dongle offers a convenience to customers in that they “put it in the car and forget about it. With the smartphone, you always have to make sure it’s charged. And you can’t forget it at home.”
On the other hand, the smartphone offers significant cost benefits, he says, because the carrier is not paying for it “and you can piggyback on the customer’s existing data plan.”
However, Maddison cites another variable that is now being considered, and that is how much driver monitoring is actually necessary. (continued.)
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“Is it cost-effective to maintain continuous monitoring?” he asks.
That is one of the questions he and his company will be considering with a view to expanding its UBI product.
“We’re looking at all the options,” says Maddison. “We’ll ramp up; the question is how fast the ramp-up will be. We’re going to look at the data and customer input before we decide.”
Other Canadian insurers looked at the impressive record of the American carrier Progressive’s UBI product and are spending large amounts of money on advertising on TV, as Progressive did.
“The perception is that the safest drivers will put their hands up first, and they want to grab them before the competition does,” says Maddison, adding: “That’s not our strategy.”
TOMORROW… ARE SMARTPHONES THE SOLUTION?
