FSCO.UBI

UBI stands for Usage-Based Insurance. It's invasive, and the privacy commissioner has ruled that the data it collects is subject to privacy laws, just like credit scores. Normally, UBI data is used only to give rate discounts for good driving. There are interesting similarities & differences between UBI-rating & credit-score-rating.   Forum

Pop Quiz

Which of the following are prohibited risk classification elements in Ontario Auto:

• claims where fault < 50%
• credit history/score
• territory

BattlePlan

Based on past exams, the main things you need to know (in rough order of importance) are:

• facts about UBIP the insurer must communicate to the insured
• valid uses and other issues regarding UBIP data
• goals & concerns of UBIP programs

Top Questions ← Questions you absolutely need to know!

reference	part (a)	part (b)	part (c)	part (d)
E (2018.Spring #4)	reasons for UBIP: - versus credit-scoring	UBIP concerns: - from FSCO	transparency: - insurer communication
E (2016.Fall #2)	see FSCO.PPA	see FSCO.PPA	see FSCO.PPA	(d) see FSCO.PPA (e) UBIP data: valid uses
E (2016.Spring #3)	see AAA.CrdSc	see AAA.CrdSc	SCENARIO: - consent
E (2015.Fall #3)	transparency: - insurer communication	competition: - how to promote

In Plain English!

Intro

• UBIP (Usage-Based Insurance Program) is a way for insurer to collect information about an insured's driving habits by installing a telematics device inside the insured's vehicle. It records things like speed, acceleration, and braking. (It's yet another step closer to Big Brother!) The purpose of this FSCO bulletin is for the superintendent to communicate to insurers the extra filing requirements for a filing containing a UBIP component.
• It's important to know that FSCO regards telematics data as personal, even though the device can't identify the specific driver. (It's assumed that the driver is either the named insured or a family member.) Insurers are responsible for ensuring that privacy regulations are met. To meet this goal, they should use privacy by design principles.

• Question: What does the UBIP contract cover?

The UBIP contract is an agreement between (insurer, insured) beyond a typical auto policy: insured agrees to install & use device & insurer agrees to use data only for specific purposes)

• So, the responsibility of the insured is pretty clear. But what is meant by "specific uses" as far as the insurer is concerned? This is extremely important:

Valid uses: discount-setting (Yup, that's it!)

Invalid uses: decline, cancel, non-renew policy, or to confirm rating criteria already used (like miles driven & garaging)

• Actually, there is something called an opt-in clause, and if the insured opts in, the insurer can use the data for certain other purposes (like marketing).

Transparency

• In addition to privacy considerations, regulators are concerned with transparency. Having a device inside your car is a significant invasion of your personal space, so regulators want to make sure that insureds understand exactly what data that blasted device is recording! Broadly speaking, insureds should be able to access their data, and, if necessary, correct errors. Aside from this, the insured should be given the details of how the UBIP discount works, and who has access to all this data.

• A related point concerns the information that must be included in a rate-filing . You can think of this as transparency for the regulator. For the regulator to do their job properly, they need to know exactly how the UBI program works.

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Data

• Since data collection from the telematics device is such an integral part of UBIP, careful consideration must be given to how the data is treated. By installing the device, the customer gives intimate access to personal data. This data must then be transmitted to the insurer, stored, analyzed, and made available to the customer, presumably on the insurer's website. It's a new way for insurers to operate and there will likely be growing pains when an insurer first offers this service. Hacking is obviously also a concern.
• Anyway, here are 4 data considerations related to UBIP. @TASS

@T: at Termination - ensure: [ no further data is captured, transferred, analyzed ] after UBIP or policy termination

A: Accuracy - ensure: [ compliance with UBIP discount, data errors fixed, customer disputes resolved, customer hasn't tampered with data ]

S: Security - ensure: data [ capture, transfer, analysis ] is done in secure environment

S: Storage - ensure: data [ deleted, anonymized ] when there is no longer a clear business need (Exs: opt-out, doesn't renew, data not relevant for discount)

• There was a good question from 2016.Spring #3 that combined UBIP and credit scoring You'll have to refer to a copy of the exam for the full question because it's quite long, but the idea is that an insurer wants to introduce a new rating variable: # of dental visits by insured

parts (a) & (b): The question specifically directs you to consider the AAA reading on credit scoring, and if you've studied that reading, you'll immediately see how it relates. (More on that when we get to AAA.CrdSc.)

part (c): The question doesn't tell you to relate your answer to UBIP issues, but that's the first thing that popped into my head. (UBIP is very much concerned with consent and data issues.) My answer listed what an insurer must communicate to the customer to promote transparency - how the discounting works, and who has access to the data. The examiner's report said that many answers were accepted.

• This leads us to the last point I'd like to make on UBIP, the similarities & differences to credit scoring.

similarities: both are relatively new, potentially controversial, require informed consent, and are generally used only for discounting

differences:

• data source: UBIP requires a device installed in the car, credit scoring uses a credit bureau
• data quality: UBIP data is thin, credit scoring data is highly credible
• usefulness: UBIP is too new to know, credit scoring data is useful (statistically significant)

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BattleCodes

• Memorize:
  • what the UBIP contract covers
  • valid & invalid uses of UBIP data
  • info that must be communicated to customer
  • 4 data considerations

• Conceptual:
  • similarities & differences between UBIP and credit scoring

• Calculational:
  • none

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  Forum

POP QUIZ ANSWERS

• Risk classification elements for Ontario Auto:
  • claims where fault < 50%: accepted (claims where fault < 25% is prohibited)
  • credit history/score: prohibited
  • territory: accepted