Data, Electronic Documentation and Innovation in the Insurance Industry
BY DAVID MCGOWN
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.
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