By Michael Garellek and Joey Suri (Articling
Many Canadian automobile drivers have now enrolled in
usage-based insurance ("UBI") programs
to benefit from a discount on their insurance premiums. Using
telematics, UBI programs record several factors such as
acceleration, hard braking, mileage driven, time of day travelled
and sharp turns to analyze driving behaviour and reward safe
driving. New technology now allows smartphone applications to track
such driving habits.
Currently, only certain insurers in the provinces of Ontario and
Quebec offer such UBI programs. Similar programs are expected to
launch in the provinces of Alberta and Nova Scotia in the upcoming
This technology can be particularly useful for certain groups of
consumers, such as younger drivers, allowing insurers to set a
premium based on their actual driving habits rather than statistics
drawn from other drivers of a similar demographic.. The Financial
Services Commission of Ontario ("FSCO")
has stated that these programs also incite safe driving practices
and could result in fewer accidents on the road.
However, concerns have been raised regarding the use of this
technology, particularly regarding privacy and the use of the
In a bulletin published concerning UBI's in October 2013,
FSCO stated that the data collected through UBI technologies should
be treated as "personal information" as defined in the
Personal Information Protection and Electronic Documents
Act, and that insurers must comply with all applicable
legislation. This legislation includes requirements that
organizations obtain an individual's consent to collect, use or
disclose his personal information, and use appropriate safeguards
to protect any personal information held by organizations.
FSCO expects insurers to disclose the impact of the operation of
the vehicle by a person other than the policyholder. Furthermore,
in Ontario, pricing programs related to UBI must be filed and
approved by FSCO's Superintendant and where the enrollment
discount is only offered for one term, or where the impact of the
actual pricing program discount is expected to differ materially
from the enrollment discount, the insurer will be required to
submit annual reports to the Superintendent.
Following in the footsteps of FSCO, the Autorité des
marches financiers ("AMF"), which
regulates the automobile insurance industry in Quebec, published on
April 9, 2015, a Notice regarding the offering of usage-based
automobile insurance products
("Notice"), outlining its expectations
for UBI programs. Similarly, it stated that the collected data must
be treated as "personal information" and that insurers
must comply with the provisions of An Act respecting the
protection of personal information in the private sector.
The AMF is of the opinion that the existing supervisory
framework, in particular the Sound Commercial Practices
Guideline and the Outsourcing Risk Management
Guideline, apply to UBI programs.
The AMF, like FSCO, states that participation by consumers in
UBI programs should be done on a voluntary basis only, and expects
them to be properly informed about the program and the changes made
to it during the term of the insurance contract. For instance, it
expects consumers to be informed of:
program eligibility criteria;
type of data collected;
use of data (e.g., as part of an investigation for the
settlement of a claim, where applicable);
impact of data on automobile insurance premiums;
period used for insurance premium reviews.
Regulators expect insurers to make the consumer's UBI data
accessible to them. In our view, the advent of smartphone UBI apps
will make it easier to comply with this requirement. They also
expect insurers to cease receiving data once the consumer opts out
of a UBI program, and that data should not be used to decline,
terminate or refuse to renew an insurance policy.
It is interesting to note that earlier this year, the
Société d'assurance automobile du Québec
(the "SAAQ"), Quebec's public
automobile insurance plan, announced a voluntary UBI program to be
introduced in 2016. The SAAQ and the Quebec Transport Ministry have
also indicated that the tracking device may become mandatory for
convicted dangerous drivers.
We can assist insurers with any regulatory issues related to UBI
and in ensuring their programs are compliant with the applicable
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