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Insurance industry's driver monitoring device is habit-forming

The youngest drivers pay 60 per cent more for insurance.

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The Insurance Bureau of Canada has some stats guaranteed to scare the hell out of parents everywhere:

People in the 16-to-24 age group account for 9 per cent of all drivers but 25 per cent of all road accidents and fatalities.

Drivers 16 to 19 have four times the fatalities of those aged 25 to 34 and nine times those aged 45 to 55.

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Young drivers or their parents pay dearly for insurance, by consequence.

"Drivers between the ages of 17 to 25 can expect to pay on average between $4,000 to $5,000 [annually] for auto insurance," says Joe Daly, communications director at Desjardins Insurance. "The reason is simple: Young male drivers have accidents, serious accidents." And young women are catching up, fast. "They're closing the gap, and not in a good way," says Peter Karageorgos, IBC manager of industry and consumer relations for Ontario.

Net-net, insuring the young and restless is risky business. In general, the cost of their auto insurance is 60 per cent higher across Canada than for a 25-and-over driver. Now there is one solution to mitigate the sticker shock, and the guys riding to the rescue are the same insurance actuaries who build the risk models. Among those leading the charge is Michel Laurin, the president and CEO of Montreal-based Industrial Alliance Insurance whose Mobiliz program introduced user-based insurance (UBI) to the young-drivers marketplace.

Here's how it works: Once signed up, young drivers attach a high-tech telematics gizmo to their cars that tracks how aggressively (or to put a more positive frame on it, how sensibly) they drive.

"It measures how quickly you accelerate, how hard you brake, how fast you drive relative to the speed limit and how you turn," says Suzanne Michaud, vice-president of client affairs at Industrial Alliance.

Drivers get feedback daily about their driving habits. By hitting stipulated performance standards, they receive discounts on their premium, which can change every 30 days depending on the previous month's performance.

"The discounts can be as high as 25 per cent but they average about 12 per cent," Michaud says. Although the company doesn't divulge numbers for proprietary reasons, Michaud underscores how more than 80 per cent of young drivers now opt for Mobiliz auto insurance.

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"There is a real opportunity to change behaviour," Karageorgos says, "because it forces drivers to pay attention for the simple reason there's something in it for them. If you can maximize your discount why wouldn't you?"

The Mobiliz program is only available in Quebec and Industrial Alliance has no immediate plans to roll it out across the country. Another Quebec-based insurer, Desjardins, introduced a different UBI telematics product in Quebec and Ontario a year ago and has signed up over 50,000 customers.

Desjardins' Adjusto is pitched to all-age drivers. Opposed to the Quebec-only program, the discount kicks in when a policy is renewed and lasts for the year, rather than ratcheting up or down monthly depending on the previous month's driving performance. New policy holders have their driving monitored for three months before a discount is applied.

Like Mobiliz, Desjardin attaches a telematics device under your steering wheel that feeds back data to the insurers on speed, acceleration, braking, etc. But Desjardins factors in other data, as well: How much you drive and when you drive. As Daly observes: "The more you drive, the odds of having an accident increase. If you drive at night, accident risk also increases." Discounts track those offered by Mobiliz.

Is such UBI auto insurance the wave of the future? "We think it is going to change the industry," Daly says. Desjardins plans to offer its UBI product in Alberta in the near future and later on the East Coast. Both Bellair, owned by Intact, and Co-operators just launched UBI programs and CAA Insurance is about to launch one, as well.

Still, the big question remains: Will the knowledge of how they drive encourage drivers (of all ages) to change their behaviour? Because their UBI programs are so new, insurers are reluctant to say so, conclusively. But Desjardins' Daly believes the signs are encouraging. "They've been using UBI telematics in fleets [companies running many vehicles] for quite a few years now and their accident and fatality rates have come way down."

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If you can teach new tricks to good ole' truckers, maybe there's hope for that testosterone-charged 21-year-old in the Subaru.

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