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Insurance Telematics may finally be reaching the "Tipping Point"


The combination of wireless communications with global positioning system (GPS) tracking has resulted in a new technology called telematics — the collection and analysis of data that originates or ends inside moving motor vehicles. It is the safety benefits of this technology that have been drawing the attention of insurance companies to telematics and its ability to measure how vehicles are actually being driven. The sharing of individual or fleet on-road driving behaviour data with insurance companies has in turn been named “Insurance Telematics” with many large fleets reaping benefits from the implentation of this technology.

As technology costs continue to fall, smaller fleets are now educating themselves about telematics and learning how they can benefit from its use as well.


  • Fuel efficiency, routing, and logistics.
  • Preventative vehicle maintenance.
  • Stolen vehicle recovery.


  • Daily safety performance scorecards on driving habits.
  • E-call emergency response to get to an accident scene faster.
  • Reduction in frequency and severity of accidents.

Through Insurance Telematics driver behaviour data is electronically recorded and transmitted to insurance companies to help determine appropriate premiums for their clients. Today, most insurance companies use statistical data to measure, evaluate, and predict risks; and calculate annual fleet insurance premiums.

Other than telematics, common factors contributing to the assessment of insurance premiums include:

  • Average driving radius.
  • Motor Vehicle Records (MVRs) - Motor vehicle abstracts for driver on-road convictions and cargo/ commodities carried.
  • Provincial operating records such as the Commercial Vehicle Operator’s Registration (CVOR) for Ontario.
  • The past five-year claims history.

Insurance Telematics allow for policies to be based on stated traditional statistical criteria as well as new dynamic parameters that may include:

  • Speed of the vehicle by location.
  • Time of driving — day or night.
  • Actual mileage driven.
  • Hard braking, fast acceleration, and aggressive turning and cornering.

The monitoring and collection of undesirable driving behaviour data has created a so-called fear in the insurance industry that change to premium rating criteria could potentially occur.
Consider the following quotes that have been provided by Progressive Insurance, an industry leader in the insurance telematics space in the US:

“Driving behaviour is the most predictive risk factor — more than twice as predictive of claims costs as any other factor.”

“Drivers with the highest-risk driving behaviours have loss costs that are approximately two-and-a-half times higher than drivers with the lowest-risk behaviour.”

“The majority of drivers with lower-risk driving behaviour are subsidizing a smaller number of drivers with higher-risk behaviour.”

It has been predicted that 2014 will be seen as a “tipping point” for Insurance Telematics globally. Canada appears to be slightly behind on this new wave of change and still has some challenges and issues to address on the personal lines side, such as privacy concerns and regulations on what actuarial data can be used to calculate premiums. The application of Insurance Telematics to the fleet insurance industry could certainly grow much faster in Canada, since transportation clients are required to share their owned data. What a fleet is willing to share with their insurance company and broker is also what could help drive down their annual premiums.

In conclusion, as technology costs fall, privacy concerns recede, and regulations become more supportive, Insurance Telematics will begin to move into the mainstream. Better drivers and fleets are predicted to enrol in telematics programs, leaving behind a shrinking pool of drivers and fleets to the traditional insurance companies.