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Usage-based insurance rearing its ugly head

Over the past year, interest in usage-based insurance (UBI) is skyrocketing. Also, known as pay-as-you-drive or pay-as-you-go insurance, UBI is making car insurance premiums more personal by tying it to your actual driving behaviour, rather than historical stereotypes like young men are all bad drivers.

In fact, CAA’s MyPace program reported a nearly 300 per cent increase in usage over the last year. With zero-risk of an increase and only a chance at a reduction in premiums (as much as 30%), why wouldn’t you sign up?

There’s a drastic change afoot, however, with Ontario’s regulatory body, FSRAO, approving a change allowing insurance companies to impose surcharges to drivers with poor driving behaviours.

In other words, auto insurers who have UBI programs are not restricted to discounts only. Thus far, only Travelers Insurance, with their recently introduced IntelliDrive mobile app in Canada (see below for details), will apply a 10% surcharge on your premium for riskier behaviours.

Knowing which other insurers will apply to FSRAO to allow for UBI surcharges for riskier driving is likely a question of when not if.

However, if you believe yourself to be a safe driver, trying one of these programs is worth it.

What is usage-based insurance (UBI)?

UBI is a technology monitoring your driving habits based on how far you drive (pay-as-you-go) or how you drive (pay-as-you-drive). The idea is that if you’re a good driver, your insurance should be cheaper. It used to be measured with a “black box,” a little computer chip plugged into your vehicle’s computer system. Many providers are now using an app combined with your smartphone’s integrated technology.

How does usage-based insurance work?

Each insurer’s program operates in its own unique way. Still, generally, with pay-as-you-drive, your phone measures the distance you drive, the time of day, your acceleration, how you handle turns, and how hard you brake.

Your insurance provider uses this data, which is more accurate than stereotyping and historical demographic statistics, to determine your rate. Any applicable discount from safe driving habits is applied based on your performance.

in 2014, on the back of the recently launched programs for usage-based insurance in Ontario, George Cook, president of Dominion of Canada General insurance company said to Canadian Underwriter Magazine, “if you want to truly improve driving behaviour, you have to penalize bad behaviour.”

We’re seeing those penalties now come true, even if it is just for one insurer right now.

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How much money can you save with usage-based insurance?

Savings vary by provider’s program and the driver. Typically you can save up to 30% of your premium for safer driving.  Based on the average cost of car insurance in Ontario, which rings in at $1,505, according to IBC, you could save $451.50 a year, or $37.63 per month.

The benefits don’t stop there, though. Drivers under 25 or those in at-fault car accidents typically pay more. Aviva insurance (formerly Norwich Union) did a study where 18-23-year-olds using telematics saw a 20% lower accident rate than average.

The stats continue to impress.

In the UK, 1 million telematics policies were issued in 2017, and the number continues to climb. Between 2015 to 2018, telematics policies there saw a 118% growth, and related insurance premiums drop by as much as 50%, as it hits the mainstream. New insurance tech, or Insurtech, continues to roll out from digital pink slips to telematics, and even smartphone dash cams. Privacy advocates are fighting, but many are looking for any way to get cheap car insurance.

Car insurance companies offering usage-based insurance (telematics)

Allstate Drivewise

  • Save up to 30% on your car insurance premium
  • Pay-as-you-drive model
  • Must use it for 6 months

Belairdirect Automerit – Automerit 

  • 10% enrolment discount for signing up
  • Save up to 15% by driving safely + up to15% discount for driving less than 10,000km per year
  • Discounts applied every 6 months
  • Also uses a safety score – based on distracted driving, hard braking, rapid acceleration, risk hours, speeding.

CAA – MyPace

  • Pay-as-you-go model.
  • if you drive fewer than 9,000 km per year, you see a discount

Co-operators EnRoute

  • discontinued

Desjardins Ajusto

  • Save up to 25% on your premium
  • Pay-as-you-drive model
  • If you’re eligible for additional savings, they’ll automatically be applied to your auto insurance premium

Intact MyDrive

  • Save up to 30% on your premium
  • Automatically get a 10% discount when you enrol in the program
  • Your refund is then updated every 6 months
  • They look at distracted driving, rapid acceleration, hard braking, speeding, high traffic hours

Onlia Sense

  • Offers usage-based insurance for cashback and rewards.
  • Don’t need to be an Onlia insurance client, the app is free to use. 

TD MyAdvantage

  • Save up to 25% – you only see the discount when it’s time to renew your policy.
  • Data collected all year will impact your renewed premium.
  • Collects data such as acceleration, braking, speeding, cornering, and time of day.
  • Assigns a score to each trip – your average rating is used to calculate your discount.

Travelers IntelliDrive

  • 90-day program that uses a smartphone app to monitor your driving performance
  • Save up to 30% at renewal for safe driving behaviour (Risky driving could result in a 10% surcharge)
  • Measures time of day, speed, acceleration, braking, and distractions (handheld calls, texting while driving)

Are there any risks with these programs? 

The technology raises some privacy concerns.  Critics are questioning if the information reaches third parties or, despite all evidence to the contrary, causes premium increases. Now we know at least one insurance company who will charge, but a modest 10% increase. Most insurers, however, maintain that data is private and secure and in no way will result in a premium increase. 

Before you agree to the use of telematics or a usage-based insurance program, do your research to understand what information you’re giving to insurers and what they do with that data. Canada’s Personal Information Protection and Electronic Documents Act (PIPEDA) protects your information. The police can’t use the data against you.

In fact, the FSRAO states, “Insurers are responsible for ensuring that any UBIP program, including consent documentation and associated collection, use or disclosure of personal information by the insurer or third parties, meets all requirements in relevant privacy legislation.

The bottom line

New vehicles now come with built-in telematics to easily turn them on or off with your insurer. However, using an app-based version with instant feedback and results are nice. Like it or not, it’s coming. Whether you want to take advantage of the possible discounts is up to you. Whatever you do, don’t cancel your car insurance, you may be hit with penalties and other fees. Also, if your provider doesn’t offer it, ask them about it, it’ll put pressure on them to start offering usage-based car insurance. Of course, always take the time to compare car insurance, generally, you’ll always save. 

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