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Reduced insurance rates for people who drive less and best

Published April 12, 2013

The more you drive the greater your risk of being in an accident.

You can be the safest motorist on the road and only use the car to go to church on Sunday, but chances are you’re paying just as much for insurance as a heavily travelled road warrior.

For years statistics have shown insurance rates in Ontario are the highest in the country and Canada among the most expensive place in the world to insure a vehicle.

While insurance firms have been using data from telematic devices to provide clients lower cost personalized usage based rates in the U.S. and Europe for years Canadian motorists still don’t have that option.

It’s coming here soon but our insurers are proceeding with caution.

The technology has been around for years and polls have shown that motorists with good driving habits would welcome the monitoring system if it meant they could save up to 30% or more on their insurance.

“We hosted a symposium which included discussions on the use of telematics in the insurance industry and we conducted a poll in early 2012 to gauge people’s interest and knowledge on it and it seemed to be a very popular concept for those who responded,” said Pete Karageorgos, manager of consumer and industry relations with the Insurance Bureau of Canada.

He said although insurance firms use the tracking devices south of the border and across the pond there is still some reservation to do so within the Canadian insurance industry despite the fact most good drivers would welcome the close scrutiny of their driving habits for premium reductions.

“Realistically, if you are authorizing it you know your vehicle is being monitored by a device that will impact your insurance premiums,” Karageorgos said.

Telematic units are match box sized devices that plug into a diagnostic port under the steering column in cars manufactured since 1997 when they became mandatory in new vehicles sold in Canada and the U.S.

They monitor motorist driving habits by calculating how often, when, how fast they drive and the frequency of acceleration and braking.

Aviva Canada conducted a pilot project involving more than 7,000 of its clients in Ontario between 2005 to 2010 in which customers had control of the device and also the final decision to submit the data on distances driven, speeds and the time of day or night they drove to determine their personal level of accident risk.

The average discount granted to participants who submitted the data to Aviva was about 19 per cent in the program that offered motorists as much as a 25 per cent reduction of their premiums if it showed their driving habits placed them at a significantly lower risk.

“It was designed as an experiment to evaluate what needed to be done if it was to become a standard in the future,” said Paul Fletcher with Aviva Canada.

Fletcher said the five-year experiment revealed there is indeed a market for personalized, usage based insurance and it showed the data collected gave the insurer a clear picture of a client’s driving behaviour for the purpose of pricing customers more fairly.

It also highlighted how important it was to establish the infrastructure to make personalized insurance beneficial to the client and still profitable for the insurer.

“Anything that encourages drivers to think about their driving habits has the potential to lead to safer roads. The market is maturing all around the world at different speeds. There is a lot of high profile advertising going on in the U.S. and Europe and more and more customers are interested in pay-as-you-drive, or usage based insurance,” said Fletcher.

Just as computers, software, storage hardware and telephones have evolved and become cheaper and more efficient in the last ten years, telemetric devices have also become more sophisticated and cost effective. So much so that the technology used in the Aviva project is already outdated.

“Insurers have been very interested in seeing the technology evolve and they are evaluating the best way to do it. The key is making sure the technology and operational service costs meet the required threshold and once they do you’ll see more and more of these initiatives come to Canada,” Fletcher added.

For most good drivers a break from high insurance rates can’t come soon enough.

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