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Co-operators Group is the newest entrant to the usage-based insurance market, launching in Ontario on Wednesday.

Fred Lum/The Globe and Mail

Canadian insurers are starting to use wireless devices that monitor a driver's behaviour to help them improve the way they underwrite risk on cars and trucks.

The devices could lead to discounts for customers and fewer losses for insurers, although it's not yet certain how many drivers will be attracted by the prospect of having their performance constantly monitored.

Co-operators Group Ltd. is the most recent entrant to the usage-based insurance (UBI) market, launching its En-route Auto Program in Ontario on Wednesday.

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Customers who sign up for the program will receive a small black plastic box, about the size of a pack of gum, that clips into a slot under the steering column. The device detects sudden braking and abrupt acceleration, as well as the time and distance driven, then transmits the data to a central database, allowing the insurer to build up a comprehensive picture of a driver's activity.

This "allows premiums to reflect actual driving behaviour," the company said. Customers could see their rates reduced by up to 25 per cent if they exhibit model habits.

UBI attracts good drivers who are confident their behaviours will lead to discounts, said Sylvie Paquette, president and COO of Desjardins General Insurance Group. The financial service company is the largest provider of UBI insurance in Canada, with 50,000 customers signed up for its Adjusto and Intelauto products. On average, these policy holders are earning a 12-per-cent discount from standard rates.

Insurers like UBI because it allows them to attract safer customers, who are more profitable, despite paying lower rates, because they make fewer claims. In addition, the data that is collected allows insurance companies to better price products.

For their part, customers can use the data to improve their driving. "It does really reduce the amount of accidents," Ms. Paquette said said. "That reduces the amount of losses and brings more profits to us."

The only three insurers in Canada to offer UBI products are Desjardins, Co-operators and Industrial Alliance Insurance and Financial Services Inc. Desjardins offers UBI in both Ontario and Quebec, while Industrial Alliance provides it only in Quebec and Co-operators is rolling out its program only in Ontario. It's not clear how quickly the products will migrate to other provinces.

A recent property and casualty insurance report from Ernst & Young LLP raises concerns about the appeal of the technology to customers. It predicts that drivers will be frustrated by the acceleration and braking limits. Another potential problem is that if there's only one sensor per car, all the data collected on different drivers will be lumped into one profile.

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Data collected by the UBI devices may be disclosed without a driver's consent where it is required by law to groups such as the police. But Leonard Sharman, spokesman for Co-operators, stresses that the data is not used for claims settlements to determine fault in an accident.

Co-operators hopes up to 20 per cent of customers will sign up, which mirrors the uptake levels the company has observed in insurers in the U.S., where UBI is already offered by many big companies.

At Co-operators, users will be able to monitor their own behaviour by visiting an online portal and reviewing records of their driving behaviour. This allows people to change how they drive in pursuit of more savings.

"It's a great way to learn about your own habits or, if you have young drivers in the home, to monitor their driving and help keep them safe behind the wheel," Kathy Bardswick, chief executive of Co-operators, said in a statement.

Younger and newer drivers, who often face high insurance premiums, show the most interest in UBI, according to a study conducted by Towers Watson in February. Those between 25 and 34 years were most favourably inclined toward the technology, with 62 per cent saying they would "definitely or probably buy a policy."

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