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May 30, 2013

Usage-based car insurance as refined discrimination

by Geoffroy Pavillet

Usage-based insurance, now being introduced in the insurance industry, is a form of refined discrimination, where drivers’ distance travelled and extent and frequency of hard braking and acceleration can affect a policyholder’s premium.

Following the lead of some American insurers, Canadian Underwriter reports that Desjardins is introducing usage-based car insurance in Ontario, using an onboard telematic device, and it plans to expand it shortly to the rest of Canada.

Canadians are used to seeing auto insurers calculate costs based on age, gender, vehicle, and driving record, which can occasionally lead to litigation, as illustrated by the Supreme Court’s 1995 Miron v. Tudel decision, which strikes the marriage discrimination against common-law partners claiming access to auto insurance coverage. However, the use of new surveillance technologies is allowing new risk parameters to emerge.

This strategy re-allocates risk and re-ranks beneficiaries, both within and outside of the insurance system.

Usage-based premiums place insurance companies at the top of the insurance system’s hierarchy of beneficiaries. It allows them to better align their insurance with risks. The reduction of underwriting risks can increase profits. In turn, this allows insurers, presumably, to offer cheaper rates to the public.

Read more on Advocate Daily.


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