Data, Elec­tronic Doc­u­men­ta­tion and In­no­va­tion in the In­sur­ance In­dus­try

BY DAVID MCGOWN

Policy - - Before The Bell | From The Editor - David McGown SE­NIOR VICE-PRES­I­DENT, STRATE­GIC INI­TIA­TIVES, IN­SUR­ANCE BUREAU OF CANADA

The era of dis­rup­tion is not only dom­i­nated by rapid changes driven by tech­no­log­i­cal in­no­va­tion, but also by com­pa­nies that can ef­fec­tively har­ness the power of con­sumer data to trans­form their in­dus­tries. These com­pa­nies use in­for­ma­tion TO OF­FER CON­SUMERS CON­VE­NIENT AND EF­fi­CIENT ser­vice, nim­bly in­no­vat­ing while es­tab­lished com­peti­tors strug­gle to keep pace.

Tech­nol­ogy evolves more quickly than reg­u­la­tion, and this is usu­ally for the best. oapid change can be un­pre­dictable, and con­sumers can BEN­E­fiT FROM REA­SON­ABLE REG­U­LA­TORY OVER­SIGHT. There comes a point, how­ever, when reg­u­la­tion can ad­versely af­fect an in­dus­try’s abil­ity to in­no­vate.

To meet this chal­lenge, Cana­dian in­sur­ers need to keep pace with cus­tomer at­ti­tudes while work­ing with pol­i­cy­mak­ers to mod­ern­ize reg­u­la­tion that pre­vents the im­ple­men­ta­tion of log­i­cal ad­vance­ments. And those wants? More choice and cus­tomiza­tion.

Telem­at­ics de­vices and us­age-based in­sur­ance

lne ex­am­ple of cus­tomiza­tion are telem­at­ics de­vices that gather data on driver be­hav­iour AND PRO­VIDE IN­FOR­MA­TION THAT CAN BEN­E­fiT both in­sur­ers and con­sumers. This in­for­ma­tion al­lows in­sur­ers to cre­ate per­son­al­ized, us­age-based in­sur­ance (rBI) prod­ucts that can pro­vide driv­ers with ac­cess to in­for­ma­tion re­gard­ing their driv­ing be­hav­iour, which in turn can give them more con­trol over their pre­mi­ums. rsage pat­terns, mileage and driv­ing BE­HAV­IOUR DI­RECTLY IN­flU­ENCE PRE­MI­UMS AND in­cen­tivize safer driv­ing habits.

Most Cana­dian ju­ris­dic­tions that al­low rBI prod­ucts place heavy re­stric­tions on their use. In­sur­ers us­ing rBI can only of­fer dis­counts on ex­ist­ing pre­mi­ums – they can­not use telem­at­ics data to de­ter­mine pre­mi­ums. eow­ever, some progress has been made in this area. In lntario, one in­surer was re­cently granted per­mis­sion to use a prod­uct based on a pay-per-mile model, a

Cana­dian in­sur­ers need to keep pace with cus­tomer at­ti­tudes while work­ing with pol­i­cy­mak­ers to mod­ern­ize reg­u­la­tion that pre­vents the im­ple­men­ta­tion of log­i­cal ad­vance­ments.” — David McGown In­sur­ance Bureau of Canada

first in Canada. This prod­uct al­lows mo­torists to mon­i­tor how much they drive and pay for their in­sur­ance based on their mileage.

In com­par­i­son, UBI is widely avail­able in the U.S., with at least 10 com­pa­nies pro­vid­ing UBI prod­ucts in 49 states.

Cana­dian con­sumers want per­son­al­ized prod­ucts. A re­cent In­sur­ance Bureau of Canada (IBC) sur­vey (The Fu­ture of In­sur­ance) found that 66% of re­spon­dents with auto in­sur­ance agreed that de­ter­min­ing pre­mi­ums based on driv­ing be­hav­iour is a fair way to price in­sur­ance. Only 10% dis­agreed.

Elec­tronic ef­fi­ciency

Cana­dian laws re­quire in­sur­ers to mail copies of key in­for­ma­tion to their cus­tomers, and doc­u­ments such as proof of auto in­sur­ance are valid only in pa­per for­mat. Nova Sco­tia is the only prov­ince that al­lows in­sur­ers to send cus­tomers elec­tronic pink slips as ac­cept­able proof of auto in­sur­ance.

Elec­tronic com­mu­ni­ca­tion is com­mon­place in other in­dus­tries, such as bank­ing, and cus­tomers have come to ex­pect the same ex­pe­ri­ence from their in­sur­ers. IBC’s sur­vey found that 58% of Cana­di­ans would choose to re­ceive their in­sur­ance doc­u­ments elec­tron­i­cally, while 69% be­lieve that re­ceiv­ing in­sur­ance doc­u­ments elec­tron­i­cally would be con­ve­nient.

In the U.S., 46 states and the Dis­trict of Columbia al­low in­sur­ers to pro­vide in­sur­ance doc­u­ments elec­tron­i­cally and cus­tomers to dis­play proof of in­sur­ance on their smart­phones. Pri­vacy con­cerns re­lated to law en­force­ment view­ing doc­u­ments on smart­phones have been cited as a rea­son to avoid us­ing elec­tronic pink slips, but in U.S. ju­ris­dic­tions, leg­is­la­tion has ad­dressed this is­sue. U.S. laws could pro­vide a frame­work for Cana­dian reg­u­la­tors to fol­low.

Tech­no­log­i­cal in­no­va­tion con­tin­ues to trans­form in­dus­tries world­wide. If Cana­dian in­sur­ers are not al­lowed to adapt to the chang­ing world, they risk los­ing the abil­ity to com­pete. If their abil­ity to com­pete is com­pro­mised, Cana­dian in­sur­ers run the risk of be­ing left be­hind. And when it’s too late, it’s too late.

Be­fore the Bell left to right co-host Su­san Dela­court, Chan­tal Bernier, Michael Cur­ran and Rachel Cur­ran. Pho­to­graph by Cyn­thia Mün­ster

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