Usage-based car insurance (UBI) is changing the way auto insurance works in Canada. It is a new invention by insurance companies, which promised to make the price of your car insurance premium dependent upon the vehicle type, distance you drive in your car, time spent in your car, places you visit and driving behavior.
(1) This approach differs from traditional insurance attempting to distinguish and reward safer drivers by providing them lower premiums and/or a no-claims bonus. According to a recent survey, more than half (56%) of Canadian drivers claimed they have a “strong interest” in purchasing a UBI policy. 62 per cent of people aged 25 to 34 years were most favorable toward the technology, claiming they would “definitely or probably buy buy a policy”.(2)
Insurance organizations sink or swim depending on the precision of their data, assessing potential risk. This being said, insurers employ all instruments at their disposal to enhance the data models used to sort the information. Insurance telematics technology combines wireless telecommunications and digital information as tools to the industry for sharpening risk management practices.(3) UBI has grown and attracted personal and commercial lines auto insurers. The Co-operators launched a usage-based car insurance plan in Ontario as of April 2014, the second insurer after Desjardins Insurance to do so.(4)
Insurance Bureau spokesman Pete Karageorgos believes most of the big players are considering applications to sell the product for commercial lines. Since each scheme must pass a thorough review by the Financial Services Commission of Ontario, which is tasked to regulate insurance, headway may be slow.(5)
Standards to be introduced across the car insurance industry faces hurdles since telematics service providers and the insurance companies are in disagreement on many points. One issue is that when it comes to harsh maneuver reporting, how often can a driver slam on the brakes before it impacts their insurance premium?(6) Another is that after a motor vehicle accident happens, insurance companies recover data from the cars involved and essentially the data determines who is at fault. However, the problem with data and this approach is that it can be misinterpreted, and in turn deny victim accident benefits.
From a legal perspective, user-based data collected by insurance companies has vast implications for car accident investigations, accident reconstruction and personal injury claims. Privacy will be at risk through litigation in a motor vehicle accident claim that disputes liability. Personal injury lawyer representing the victim may ask the court order the production of the user-based data to gain information into past unsafe driving practices from the defendant’s insurance company.(7) In contrast, Desjardins stated on its Ajusto website that the company provides the following assurances: “We will not use Collected Data to your prejudice regarding an insurance claim you have with us or in any claim that is brought against you”.(8) However, how many of you know what information your car insurance company uses to calculate how high your current car insurance premium should be? Is it really possible for a car insurance to remain unbiased when it collects so much information about your driving behavior?
As UBI car insurance premiums continue to evolve, there is an incentive for the Ontario government to order these devices to be mandatory. This and other issues around such personal data collection provoked the Office of the Privacy Commissioner of Canada to release a position paper in May 2013 arguing for significant changes to the Personal Information Protection and Electronic Documents Act(9), claiming corporations are using personal information in ways previously inconceivable. While several of these new uses have the prospective to benefit drivers and traffic safety, it increases our risk that personal information will be used by highly intrusive methods that offend our sense of privacy. While any substantial changes in the car insurance law will likely take years, organizations continue to have a duty to their customers first, no matter what crafty technology they implement.
