Insurance firms turn to telematics for discount program

An in-car technology that is estimated to save good drivers up to 30 per cent on insurance premiums is being touted as a way to introduce greater fairness to the auto insurance business in Canada.

Among the target group of the Save-as-You-Drive insurance discount program are people under 25 years (particularly young men), and so-called bad-luck drivers who have good driving habits but have experienced an accident such as losing control on black ice. But it also caters to anyone who wants more information about their driving habits.

The program, which will work only with cars that were manufactured no earlier than 1996, tracks speed, time of day driven and total mileage.

Drivers have said that they want a better understanding of the way their premiums are calculated, said Paul Fletcher, senior vice-president marketing of Aviva Insurance Co. in Toronto.

The Elite Insurance Co., a wholly-owned subsidiary of Aviva Canada, has partnered with Easyway Insurance Brokers Inc. to offer the telematics technology, which was introduced several years ago in the U.S. by an insurer called Progressive Casualty.

As a result of the program, drivers might choose to drive differently in future, said Fletcher.

“That could lead – we hope will lead – to fewer accidents, for example, and collisions,” he said.

The smart meter, also known as Autograph, is the “size of a pack of matches,” said John Belyea, president of Easyway in Mississauga, Ont.

“It essentially plugs into the on-board diagnostics port, called the OBD2, that every car made since ’96 essentially has,” said Belyea. “And it’s located just under this dashboard by the steering column.”

Drivers who sign up to the program are sold a policy attached to the smart meter and are sent a kit including the data-logging device, software and a USB cable.

The insurance company advises drivers after about 14 weeks to submit the data by plugging the device into the USB port of their computer, Belyea said.

Once plugged in, the smart metre shows the discount the driver is entitled to, he said. About 70 per cent hand in the data. 

He said some drivers, however, may not want to submit the information.

“We’re unsure why. Even if the data is not great – because it’s showing you have sped a lot – you’re not penalized. In fact, you get a five per cent discount just for sending them the data. And unless you were really a bad driver, you’re going to get more than that in terms of a discount on your policy.”

The U.S. version of Save-As-You-Drive, which has tens of thousands of customers, “still has not caught on significantly, partly because only one insurance company offers it,” Belyea said.

Over time, he predicts, a pay-as-you-go insurance system will take hold in Canada.

Right now, the technology is expensive to put in each car – the smart meter, for example, costs about $150 – but ultimately it will allow people greater control over their insurance, he said.

“So the good drivers will save even more money.”

The Canadian program is in a pilot phase involving 2,000 drivers in Ontario, but Belyea hopes to increase the participants to 5,000 by the end of 2007. Drivers in Saskatchewan, Manitoba and British Columbia will not be able to sign up because these provinces have government-run auto insurance.

The average savings that has been seen in the pilot, which involves 15 insurance brokers, is a little more than 20 per cent annually. 

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