Driver-monitoring technology

Canadian auto insurers have long been aware of the increased risk associated with some driver demographics. Individuals aged 16 to 24 account for less than 15% of licensed drivers but roughly one-quarter of accident-related serious injuries and fatalities. The Canadian Council of Motor Transport Administrators reported in 2009 that 40% of speeding drivers involved in fatal accidents were between 16 and 24 years old. This risk means drivers under age 25 face insurance costs about 60% higher than drivers 25 and older.

Usage-based insurance has entered the Canadian auto insurance market, promising relief for drivers willing to install a telematics device in their vehicle and have their driving behaviors tracked. A small box connects to the vehicle’s diagnostic port and transmits information that insurers use to assess driver risk and determine policy cost. Traditional insurance uses data such as accident statistics per age group, along with factors such as past driving record, to determine risk levels that often apply across broad categories of drivers. Usage-based insurance uses both traditional risk factors and driver-monitoring technology to calculate premiums for individual drivers based on their performance.

In 2012 Industrial Alliance introduced Mobiliz, a usage-based product specifically for young drivers in Quebec. The Mobiliz device sends information on behaviors such as acceleration, braking, cornering, and speed. Drivers meeting certain performance standards can receive a premium reduction up to 25%, although Industrial Alliance reports that discounts average about 12%. Rather than pay a fixed annual amount, Mobiliz users see premiums fluctuate monthly as the previous month’s data are assessed to calculate the current month’s rate.

Desjardins introduced Ajusto to Ontario and Quebec in 2013. Unlike Mobiliz, Ajusto is aimed at drivers of all ages and applies a discount on policy renewal. New users must allow Ajusto to accumulate data for 3 months before they can earn a discount based on their driving behaviors, and on how much and at what times they drive. Other insurers such as the Co-operators and Allstate Canada have either introduced usage-based insurance products or are developing them, and smartphone apps are being explored to offer wider appeal. Canadian usage-based insurance is currently available only in Ontario and Quebec, with other provincial regulators yet to approve it.

By linking risk to individual behavior, usage-based insurance enables insurers to offer lower premiums to safer drivers. Drivers can gain tangible benefits for safer habits, increasing road safety for all. Industry analysts further predict that telematics has the capacity to aid accident investigations and even fight insurance fraud by recording information during collisions or single-vehicle crashes.

Privacy concerns have been raised, however, and legislation is emerging to oversee insurers in data collection and use. The Financial Services Commission of Ontario has noted that telematics devices are capable of gathering far more information than insurers require when assessing risk. And users of Mobiliz can find that they are not only rewarded for good driving behaviors but penalized for poor behaviors, as their rates change each month.

Ernst & Young LLP has also suggested that drivers may become frustrated with acceleration and braking limits and with the fact that data collected by one device will be analyzed as a single profile even if multiple drivers use the vehicle.

Despite concerns, the Co-operators has observed uptake in the US of about 20%, and Canadian insurers believe that new and younger drivers will be interested in such policies. As insurers develop policies and provincial governments explore telematics legislation, driver-monitoring technology and usage-based insurance will likely become a more familiar option for Canadian drivers.
—Laura McLean
Doctors of BC, Insurance Department