Those who have purchased car insurance in Ontario know that insurance premiums are based on many factors. Some of these factors seem very relevant: of course your driving record and insurance history tell insurance companies how good of a risk you are. However, there are other factors - where you live, the car you drive, and even your age - that seem like generalized data that insurance carriers use against you. Just because you are 24 years old and driving a new BMW shouldn’t be an indication of how good of a driver you are. Right?
Good news is many carriers are offering a tool that gives our clients discounts based on how good they actually are as a driver. It’s called usage-based or telematics insurance. It’s not a new tool; in fact, it’s been around for over a decade, but it’s becoming more popular because of the pandemic since drivers are on the road less.
Telematics or UBI is a device that tracks your driving behaviours. When it first came out, it was a physical device that you plug into your vehicle. Nowadays, many carriers are offering it as an app that you install on your phone. Only caveat is that you must have a smartphone.
It’s a convenient tool that tracks your braking, acceleration, distance travelled, speed, distracted driving, time of day, etc. It takes into consideration all your drives when giving you a calculation. This means if you had to suddenly stop or accelerate for your safety on a single trip, it won’t negatively impact your score. You also have the option to indicate whether you are the driver or the passenger.
So big question: How much can you actually save with telematic insurance discounts? Generally speaking, carriers are offering discounts from 10-30% off your car insurance premiums if you are a good driver. That’s quite a lot just for having a UBI app on your phone!
Keep in mind though that it varies carrier to carrier. Some insurance carriers will give you an enrolment discount right off the bat, and then give you additional discounts based on behaviours tracked with telematics. Some carriers require you to track for 3 months before giving you a discount. Some carriers take longer, like 6 months or 1 year.
Insurance carriers promise to not increase your premium based on the telematics tracking if you are a not-so-good driver. However, they can decrease the discount that you are receiving, so it could look like your premium has gone up. For example, if your premium is $2000/year and you receive 10% off on enrolment, your premium would be $1800/year, making it $150/month. However, after 6 months of tracking, if your discount decreases to 5%, then your monthly fee would go up to $158.33. So while your premium remains the same, it’s important to keep in mind that the discount could change.
Many have concerns about the data being collected, and rightly so. Insurance companies promise that the data collected will not be used for any other reasons than calculating your good-driving discount. They promise that the data won’t be used to affect your base premium and that it won’t be used outside of their UBI app. Your calls and other actions outside the app will also not be tracked or recorded.
And as Canadians, we also have extra peace of mind because Canada does a good job of regulating data collection and data privacy here.
If you’re on the road less, then there is less of a liability to the insurance company. So why shouldn’t you save on your car insurance? Or if you drive really well, then don’t you deserve a discount, despite other premium-rating factors?
Ultimately, it is up to you, the client. There are many pluses to having telematics insurance. However, our job as your broker isn’t to convince you one way or another. We provide you with all the options and advice, so that you can make an informed decision for yourself. If you’d like to know more about usage-based insurance, give us a call or get a quote below.