Car insurance in Canada can be expensive. For drivers looking to cut costs, insurance companies are beginning to offer pay-as-you-go or pay-as-you-go insurance.
Matt Hands, director of insurance at Ratehub.ca in Toronto, explains that these are the two main types of so-called telecommunications software.
Usage-based insurance depends on how you drive, not how many miles you travel.
“It used to be the technology that I plugged into a vehicle diagnostic port and tracks driving, like how fast you’re going, the way you brake, the turns you take, even the distance we go, just to determine if we’re a quality driver or not,” explains Matt Hands.
Since then, many insurance companies have moved to app-based systems that track additional metrics, including when a driver touches his phone or engages in other behaviors that constitute distracted driving.
“These calculations have become a little more accurate and data transmission has become faster thanks to cloud computing. The information can be uploaded instantly into each insurance company’s rating software.”
The telecommunications program can benefit young drivers, who often pay the highest premiums, as they are statistically more likely to be involved in crashes and file claims. These premium rates can drop faster if drivers can meet the insurance company’s specific driving requirements.
For drivers who use their cars to travel less than 10,000 kilometers per year, a split plan can also provide significant savings. However, it is not possible to shop for this type of plan, since CAA’s MyPace program is the only option in Canada. It is also offered in only four provinces: Ontario, New Brunswick, Nova Scotia, and Prince Edward Island.
Additionally, many drivers are reluctant to adopt usage-based insurance due to concerns about price increases, the accuracy of these programs, and privacy issues, Matt Hands notes.
Lack of confidence in data collection
Natalia Pasha, a 31-year-old counselor from Toronto, said she was frustrated with her data collection.
“We’ve seen the rise of the internet and the rise of smartphones, and now we’re facing the after-effects of the way this data is used,” she asserts, referring to hacks or misuse of data on Facebook, Equifax and even the Tim Hortons app. The Office of the Privacy Commissioner in Canada recently found that the fast food chain had illegally collected location information from people who had downloaded the cafe chain’s app.
Natalia Pasha believes that these applications are not clear enough about the disadvantages of their use.
“Leaves a taste in my mouth.”
For his part, Matt Hands has not yet started with these applications because the accuracy of the calculations is still unclear.
“If I had more transparency and understanding of how they actually accounted for each scenario, I would probably subscribe, but I don’t know I had that much fear. I understand their value and I see the technological promise, I don’t know if they are fully developed yet.”
Matt Hands and Natalia Pasha both expressed concern about whether they would be penalized for speeding on motorways, when driving too fast to keep up with traffic.
A spokesperson for Aviva, the insurance company that has a plan based on the Conduimatic Aviva phone app, notes that speed is just one factor that goes into a driver’s grade.
“When evaluating driving behaviour, we will compare the driver’s speed to the speed limit set for the road the driver is taking. How quickly the speed is taken into account in the driver’s score depends on how far the limit has been exceeded, and for how long.
Conduimatic Aviva use provides drivers with an automatic 10% discount in the first year and up to 20% on car insurance premiums each year thereafter.
Matt Hands notes that many usage-based insurance programs allow for feedback on exceptional situations that can be included in the driving record, such as whether a friend is driving or if the driver of a tracked vehicle suddenly brakes.
Before going ahead with a usage-based program, Matt Hands recommends people compare providers and determine if only good behavior is rewarded or bad behavior is punished as well.
In fact, in November 2020, the Ontario Financial Services Regulatory Authority dropped previous guidance that usage-based insurance could not result in policy cancellation or surcharges.
“If someone exhibits bad driving behavior based on the rules of the program, [l’assureur pourrait] You will likely charge an additional fee at the end of the evaluation period and this can represent a 1% to 25% increase in the rate,” explains Matt Hands.
However, those programs that can reward and punish tend to offer higher discounts if good driving habits are demonstrated, he adds.
“It just depends on what you’re looking at and your tolerance for risk in those scenarios.”
While it’s possible to get good discounts, you have to think carefully about the type of driver you are, and if you can still follow the rules of the road, Matt Hands warns.