Depending on who you are, car insurance assessments can be grossly unfair.
Being of a certain age or gender, or even living in the wrong postal code, can result in paying more for insurance, no matter how good a driver you may consider yourself to be. It's the unfortunate downside of insurers using statistical probabilities to predict the likelihood of customers making claims.
That may be set to change as some insurers are offering customers the option of installing smartphone apps or devices in their cars that track their driving. The data created can then result in a more personal assessment that more closely reflects the individual's actual driving habits, outside of demographic statistics.
The results, insurers say, are potentially lower rates.
"This optional program caters to customers who want to monitor their driving habits, get the most personalized rate based on their driving behaviour and save money," says Jean-François Lessard, chief data officer for Intact Financial Corp., in an e-mail.
"Having more information allows us to do that. Our experience has been that more and more people want to use tools that will give them this benefit."
Toronto-based Intact began offering its "my Driving Discount" tracking program in Ontario in 2013, followed by a rollout to other provinces. Mr. Lessard says that just less than half of all new customers are opting for it.
Under the program, customers can either plug a dongle into the on-board diagnostic (OBD) port in their car or download an app onto their smartphone. In both cases, customers are tracked for nine months, at which point a full assessment is calculated.
The tracking takes into account how often the driver brakes hard, accelerates rapidly and uses the vehicle at night, which is a riskier time to be on the roads. Intact says it does not consider speeds in its assessments.
More than 350,000 drivers across Canada have participated in Intact's program so far, with the majority getting discounts of 10 to 25 per cent, according to the company. Intact also recently announced a joint initiative with business school HEC Montréal to improve the accuracy of collected data.
While the promise of lower rates is appealing to some consumers, many are wary of installing tracking devices in their cars. About 45 per cent of respondents to a Pew Research Center survey in the United States last year said the tradeoff was unacceptable, versus 37 per cent who said it was okay.
Those who expressed doubts cited privacy concerns and a general lack of faith in insurers. "I do not trust insurance companies to do anything good," said one respondent. "I do not like to be constantly watched and judged," said another.
Consumer advocacy groups say the attempt to shift to individualized assessments is fraught with problems. Among the biggest issues is transparency, or the potential lack of it. While insurers typically make customers' data available to them, they don't necessarily show how each individual compares against others, which can further the same unfairness the system is supposed to counter.
"It's a large philosophical change for the insurance industry because they're moving to behavioural insurance," says John Lawford, executive director of the Public Interest Advocacy Centre in Ottawa. "Much like behavioural targeting, you don't know what's going into the special sauce."
Collected driving data is also a potential gold mine in court cases, he adds. Lawyers are likely to demand such information in an effort to show defendants' poor driving histories.
Intact, for one, does not specify how long it retains customers' data – its website says such information is kept only for "as long as it is reasonable for us to do so." The company also says it will never sell customer data to third parties or share it unless it is required by law.
Aurélie Labbe, an associate professor at HEC who is working with Intact to improve data accuracy, says the potential positives in shifting the assessment approach outweigh the negatives.
In their bids to become "smart cities," many municipalities are already installing tracking sensors on streets and in infrastructure. Drivers tracking their own movements could be an effective counter to getting ahead of that inevitable trend, she says.
"It's better to provide the data when you are completely aware that you're doing it compared to some other situations where we are tracked without knowing it," she says. "It's the reality we face."
As for determining drivers' rates in the first place, "It's a very fair way to assess the price of insurance," she adds.