Can telematics get Canadians feeling good about insurance again?

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In July, J.D. Power released the results of a study of 2,500 Canadian consumers who had filed physical damage loss claims with their auto insurance companies. The news was not great.

Satisfaction with the handling of drivable claims had dropped by 19 points, mostly because of two factors: the first notice of loss and final settlement. Worse, the declines in these areas are dragging down overall consumer satisfaction by 16 points, from 2014, to 786 points out of a possible 1,000.

The researchers recommended that insurers do a better job of managing customers’ expectations about when repairs would be completed, because 80% of repairs were not completed when promised. In addition, the time it took for claimants to get settlement payments had actually increased in 2015.

It sounds like a job for telematics, doesn’t it?

Telematics to the rescue

A vehicle that’s connected via on-board systems or a device plugged into the OBD port can immediately alert the insurance company if there’s an accident or breakdown. The insurer or platform provider can in turn notify roadside assistance, emergency personnel and the claims or customer-service department. A mix of telematics and information derived from an immediate call to the insured driver can immediately flow into the claims management system.

A study by European partners of Octo Telematics that compared the claims process with telematics and without, found that the technology provided an improvement of between 20% and 25% in the loss ratio, according to Nino Tarantino, CEO of Octo Telematics North America. That improvement included reduction in fraud, optimising costs and more accurate pricing of claims – all great for the insurer but of no interest to consumers. However, the European insurers also saw a reduction in the amount of time it took to settle claims using telematics.

Tarantino says that Octo’s European telematics customers close claims within two to five days, as opposed to the average claims closure timeframe of 20 days. The company aims to help Canadian insurers get similar results.

“We learned a lot from the European market about how telematics can improve the claims process. We are bringing that experience in Europe to North America in working with our partners,” Tarantino says.

A better experience

While the insurance market in the United States has focused on the Progressive model of rate reductions for good driving behavior, in Europe the insurance telematics focus has been on how telematics can improve the claims process – and that’s where the Canadian market should focus, Tarantino thinks.

Robin Harbage, a director of Towers Watson, notes that telematics and related connected-car services allow insurers to be much more proactive at the first notice of a loss. A wealth of information about the vehicle is immediately available, as well as all policy information. “The response to the customer can be very customised,” he says.

Privacy concerns abating

A 2014 survey by KANETIX, a Canadian insurance rate-comparison service, found that 73% were concerned that personal data would be used against them, for example, to cancel a policy, while two thirds feared the devices would be inaccurate. But usage-based insurance is spreading throughout the country.

Towers Watson recently completed a survey rating consumer interest in usage-based insurance and additional services enabled by telematics covering the United States, Canada and Brazil. “Resistance to idea has gone down over time,” says Harbage. Nor has the company found any difference in interest and acceptance of UBI among Canadians from other populations studied.

Tarantino, meanwhile, thinks Canadians are actually more willing to adopt new technologies – and less concerned about being tracked – than their counterparts in the US.

What’s the hang-up?

If telematics could do so much to increase insurance customer satisfaction, what are the barriers to launching UBI?

First, Harbage points out that only 10 to 20% of consumers change their insurers frequently, so there’s no great pressure for insurers to be more proactive – although declining customer satisfaction could do it.

Insurance companies also must change their processes and back-office systems in order to implement usage-based insurance and advanced services. That’s costly and time-consuming.

In fact, Canadian insurers are moving forward with UBI, launching pilots and getting their ducks in order. Both Octo and Towers Watson report partnerships with major insurers throughout Canada.

Tarantino notes that Octo’s Canadian partners are ramping up quicker than the Americans. He says, “It takes our US partners two to three years to get where our Canadian partner did in one year.”

Desjardins General Insurance Group, one of Canada’s largest with 1.6M customers in Quebec, Ontario, and Alberta – and the speediest-to-market – launched its UBI product, Ajusto, in 2013. In May of 2015, it released Ajusto, a mobile app for UBI; then, in early July, it announced that Ajusto was available for the Apple Watch.

Just as Progressive’s aggressive marketing in the US pushed other insurers into UBI, Harbage says Desjardins’ high-visibility launches will cause other Canadian companies to get their act together. He says: “The Canadian market has in some aspects moved fairly quickly. [Like Progressive in the States], the ones who are earliest to market will see huge benefits.”

Don’t miss Insurance Telematics USA 2015 this September 2-3.


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