Insurance companies traditionally lump together drivers by age, gender, and location, using statistical data and averages to determine car insurance premiums.
But in some provinces, there is another option (in some provinces, at least). With telematics, you pay for the driving you actually do — not the driving an insurer has predicted someone statistically like you might do.
Telematics, also known as usage-based insurance (UBI) or pay-as-you-drive insurance, calculates your insurance based on how you drive. In particular, the system rewards drivers who drive short distances, who drive infrequently, and who drive sensibly.
Using a small piece of technology installed in your car, telematics insurance tracks your driving using criteria such as distance traveled, time of day on the road, how fast you accelerate, how hard you take corners, and how aggressively you brake.
For good drivers, this model can save you money in premiums. For example, someone who drives short distances slowly will be charged less than someone who drives at high speeds over long distances.
Most insurers allow you to monitor your own statistics online, so you can track your driving behaviour. Obviously, though, it’s your insurer who will be paying the closest attention to your data — and if you’re successfully driving to their prescribed guidelines, and if your record shows your driving is improving, you can earn insurance discounts.
Telematics makes insurance pricing hyper-individualized. Rather than being based on aggregated actuarial data like traditional car insurance — such as gender, age, marital status, postcode, and previous claims — telematics is based on individual driving behaviour. This is intended to make premiums more precise.
However, like traditional car insurance, telematics is specific to the vehicle and will record the driving habits of whoever drives your car — so your premium would also reflect the driving habits of, for instance, your teenage son who borrows your car. Insurers also use your telematics data to ensure claim accuracy and reduce fraud by analyzing driving information at the time of a crash, and in some cases they can also track your car if it is stolen using telematics system GPS.
Pros for the driver:
- Cheaper insurance for good, low-risk drivers
- Drivers are able to receive a premium discount of up to 25% by meeting behavioural incentives to reduce their kilometres driven and drive more carefully
- The discount incentives encourage safe driving and reduce crashes
Cons for the driver:
- Tracking driver data has raised privacy concerns. In Canada, however, the data collected by an insurer is subject to strict privacy policies and can’t be used without your consent
- Extenuating circumstances, such as hard braking if a cyclist swerves in front of you, is not able to be recorded in the data
- In some provinces (Quebec, for example) poor driving with telematics can actually lead to an increase in premium
Telematics programs are currently offered in Nova Scotia, New Brunswick, Quebec, Ontario, and Alberta. Other jurisdictions are considering the insurance systems.
- Does Insurance Cover Someone Else Driving Your Car?
- How Claims Affect Your Car Insurance Rates
- 10 Car Insurance Myths Canadians Need to Stop Believing