When usage-based insurance (UBI or telematics) first came to Ontario in 2013, the law allowed insurers to give discounts based on good driving behaviour, but did not allow surcharges based on bad driving behaviour. As of November 2020, the law has changed, and insurers can now surcharge you if your telematics app records risky driving behaviour like speeding.
Usage-based auto insurance has been in Ontario now for close to eight years. It is a real-time, data-based approach that measures an individual driver’s behaviour behind the wheel, and then adjusts premiums accordingly. The common complaint about auto insurance pricing has always been that some drivers are penalized unfairly based on their age, gender, or lack of experience. Telematics or UBI is one way that some insurers are giving all drivers the opportunity to prove they are not dangerous, and pay premiums accordingly. Drivers who consistently demonstrate safe driving can rake in discounts as high as 25%. Logic suggests that the opposite should also be true however. If a driver proves that they regularly engage in risky behaviour behind the wheel, it makes sense that they should pay more. Now they will, in some cases.
How much can you be surcharged?
The FSRA (the Ontario regulator for auto insurance) has not set a maximum surcharge for UBI. Insurers currently offering telematics generally give a maximum 25% discount, and a maximum 10% surcharge. The average customer using UBI in Ontario saves 10% compared to what they would otherwise pay. Just like all auto insurance rates in Ontario, telematics discounts and surcharges must be approved by the FSRA before they are offered to consumers. Insurers submit claims data from existing UBI customers to justify their rate filings.
Can I say no to insurance companies tracking my driving?
Absolutely. UBI programs are completely optional. No insurance company can insist that you install a telematics device or app in your car, and all insurers licensed in Ontario offer more traditional insurance pricing based on things like your postal code, age, driving experience, accidents and tickets on your record, and the type of car you drive.
How does UBI work?
Most insurers that offer UBI will give you a small discount (up to 5%) for signing up to the program, and then adjust your rate later (mid-policy or upon renewal) based on your driving behaviour over 6 months or a year. When you sign up for a telematics program, the insurance company will either send you a device to plug into your car, or they will ask you to download an app to your smartphone. The app or device will then track some or all of the following:
- How many kilometres you drive
- What time of day you drive
- How fast you drive
- Whether you accelerate suddenly
- Whether you brake suddenly
UBI not only offers incentives and disincentives after the fact at renewal time. Most of the programs available right now in Ontario offer real-time feedback to encourage safe driving behaviour. So when you drive safely, you see clearly how much you’re potentially saving; and when you don’t, you see how much it could cost you if you continue.
(Keep in mind that there are some apps, like CAA MyPace, that only measure the distance driven, and others that only measure speed, acceleration and deceleration.)
Can the insurer use my driving data for anything else?
No. Insurance companies are only allowed to use your driving data to adjust your premiums, and must clearly tell you at the time you sign up what they are using the data for. They cannot sell the data or share it with anyone else. However, the fact is that Ontario regulations on UBI could go much further to protect consumers. Specifically, we think that consumers should own their own UBI data. So if you had, say 5 years of awesome driving data with one company, you could choose to take that with you if you wanted to shop around with other insurers. Right now, you only benefit from the data as long as you stay with the same company.
Benefits and drawbacks of usage-based insurance
Based on industry-wide data collected since UBI was introduced here, and data from earlier UBI programs in the US and Europe, UBI has shown the following benefits:
- The average customer saves 10% on their premiums
- Customers on average choose to drive less, contributing to less pollution and traffic congestion
- Customers on average actually drive more safely, contributing to fewer accidents
The real-time feedback that is part of most UBI programs creates a powerful incentive that encourages safe driving behaviour, particularly for young or learning drivers. Many analysts have suggested that allowing for negative consequences (aka surcharges) for driving behaviour that has proven to be dangerous will provide an even better incentive for drivers to improve their driving. So it’s very possible that the introduction of surcharges could bring even greater benefits as time goes on. The reality for many older drivers with a good record is that even if you’re a safe driver, you might like to hear the engine rev a little when the conditions allow it, and you might just leave a little money on the table so you don’t have to worry about it. Ultimately, it’s your decision.