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| Drive Safely, Save Cash |
November 10, 2005 |
By Michael Bettencourt
NEW BLACK-BOX CAR TECHNOLOGY WATCHES YOU DRIVE. DO WELL AND YOU CAN SAVE INSURANCE DOLLARS.
What Bryan McDermott wanted was a better rate on car insurance. What he received was an early look at the potential future of insurance in Canada.
McDermott was among the first people to sign up for Autograph, a pilot program currently offered only in Ontario. A customer attaches a small, matchbook-sized device to the car. The device records every dip, slip and stomp on the gas and brake pedals, no matter who’s driving. The information is collected and analyzed and - if the driver is a safe and cautious one - the insurance company can decide to offer a discount.
The program delivers what most people want from their insurance - a lower price - but demands in turn a price that some may find too high to pay: real-time monitoring of every move behind the wheel.
“When I mention this program to people, the first thing everyone asks is ‘How can you give your insurance company all your driving habits?’” said McDermott, who plugged the device into his wife’s Honda CR-V in April. He then uploaded data recorded by the device to his computer and sent it back to his insurance company by the end of July.
He received notice in August that he would get a 21 per cent discount on his next six-month auto policy, a reduction to $421 from $523. He has already requested another black box for the couple’s other car.
Launched in March of this year by Aviva Canada, one of Canada’s largest insurance companies, the program offers an automatic five per cent discount to all drivers who try it and send in their information. At launch, Aviva Canada said it had exclusive rights to this new patent-pending technology and has plans to expand the Autograph program across the country. Company officials are still describing it as a pilot program and won’t predict when it may be offered elsewhere in the country, but all signs have been positive so far.
The data on these drivers started arriving at Aviva in late summer, said vice-president of corporate communications Sally Turney, so overall trends have not really emerged yet, but she said early results have been very encouraging.
“The average discount so far is 20.2 per cent,” Turney said. The Autograph program brochure distributed to eligible drivers offers anywhere from a five to 25 per cent insurance discount, but Turney said actual figures are based on a computer model that automatically judges the risk associated with one’s driving patterns, so the insurance break can be even more than that.
“The highest discount we gave so far was 35 per cent, which would be given to vehicles used very minimally, used perhaps only weekends, like retired people,” Turney said, noting 44 per cent of respondents so far have achieved a break of 20 per cent or more, while only 3.2 per cent of drivers received the minimum five per cent. “The numbers are good so far for sure.”
The device, produced by Davis Instruments in California, plugs into 1996 or newer vehicles and measures all braking or acceleration, top speed, average speed, distance and time of day travelled. It attaches to the exposed on-board diagnostics connector of most newer vehicles.
The interesting privacy twist to this program is that once you disconnect the device and upload it to your computer, you can review all the data at home, plus see the insurance discount it would give you right there on the screen, then decide for yourself whether or not to transmit the information. Turney insists that even if the information is not sent back to the company, they won’t raise rates, they’ll just continue on as they did before.
Company executives also insist the program will not be used to raise rates, and the information provided will be sent securely over the Internet and kept strictly confidential. “We’re not going to collect the info to raise rates - absolutely not,” Turney said. “It’s the consumers’ choice to send it to us.”
Monitored future
Similar pilot programs have been started in some states in the U.S. with Progressive Insurance, as well as in Italy, Ireland and the United Kingdom, with some doubts arising over whether such pay-as-you-drive (PAYD) programs are commercially viable. A report released this summer by Strategy Analytics, an international consultancy firm, noted problems with these programs including prohibitive launch costs, privacy violations, patent fees, “back-office” data integration and difficulties in measuring the costs vs. benefits.
“While PAYD protects drivers from generalized assumptions, there are still major hurdles to overcome before PAYD insurance schemes are commercially viable,” said Clare Hughes, analyst for the firm’s Automotive Multimedia & Communications Service. “These are not going to be successfully addressed for a number of years.”
Still, although the report found some significant short-term road blocks to such programs, it also found advantages as well, for both insurers and consumers, including lower costs and protection for drivers from generalized assumptions based on age, gender or geographic location. The report concluded these major advantages would eventually lead to the widespread adoption of PAYD programs, once costs came down through the use of data recording devices on commercial fleets, and when more insurance companies figure out how to translate driving habits into more competitive rates.
“The days of the once-a-year insurance premium will eventually disappear for the majority of consumers, with the rollout of risk-based variable monthly billing,” Hughes said.
Toward safer driving
The Autograph system differs from others in that it does not employ GPS technology to measure vehicle speeds, said Joan Peterson, vice-president of marketing for Davis Instruments.
“Once you plug it in, you forget it’s there,” she said in an interview from her Hayward, Calif., office. “The whole point in the insurance programs is to encourage and reward safe driving.”
This push toward safe driving was the main reason Aviva first applied for the rate-change option to the Financial Services Commission of Ontario (FSCO), the government agency that must approve changes before they can be implemented. Officials at the FSCO confirm Aviva has not applied to raise rates based on any information received through the Autograph program, although they note rates can be affected by outside conditions like natural disasters, and all companies file new applications to the FSCO on a regular basis.
“We encourage safe driving, and this program shows that a safe driving record really does impact on your rates,” said Rowena McDougall, senior communications officer for the FSCO.
In the U.S., similar devices are sold for about US$179, aimed at people curious for details about their driving habits. Indeed, looking at a statistical rundown of your driving can be quite eye-opening, McDermott said.
“Now that I know the parameters, I drive a little more carefully,” since speed and acceleration are the biggest areas of potential discount. “We’re both very aware of staying below 120km/h, and watching the quick takeoffs.” He admitted, though, to going over that once or twice in his first three months with the device.
“Insurance consumers have been asking for more ways to directly influence and lower their auto premiums,” said Igal Mayer, president and CEO of Aviva Canada. “Autograph is an easy way for drivers to take control of their auto insurance premiums by demonstrating safe driving habits.”
Autograph is the first implementation of an idea that may offer real savings to people who drive relatively few kilometres, like urbanites who use the TTC to get to and from work, seniors or specialty car owners who only drive occasionally.
At the same time, it points to a future where companies may have more information on us than ever before. But if that delivers a financial benefit, many may be willing to give up some privacy.
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