Usage-based insurance
Drivers pocket savings by allowing their insurer to come along for the ride
When his auto insurance company offered him the option to pay lower rates, Justin Lam leaped at the chance, even though it meant allowing his insurer to electronically tag along with him on every trip.
The 39 year-old from Toronto downloaded TD Insurance’s Myadvantage app on his cellphone and started receiving scores out of 100 based on how fast he was going, whether his turns were too sudden, how hard he was braking and even what time of day he tended to get behind the wheel.
“They said there was no downside. So even if you score terribly on the app, the worse you could do is pay the same rate, with no discount,” Lam said.
The payoff arrived last month with his insurance renewal notice. With an average score in his first year of about 85, he said he is saving around 20 per cent, dropping his $1,800 annual bill to less than $1,500.
If a person doesn’t mind the loss of privacy and their driving will stand up to intensive scrutiny, usage-based insurance may be right for them, experts say.
Driver monitoring programs are generally delivered in two ways, by a smartphone app that “sleeps” until it senses driving has started, or by a telematics device plugged into the car’s diagnostic port. Both use GPS and sensors to collect information and send it wirelessly to the insurer’s website.
Drivers usually receive an enrolment discount of five or 10 per cent and then can earn up to another 15 to 25 per cent discount that is applied when their insurance policy is renewed.
Users can go online to see how their driving stacks up and make corrections. For example, the TD Myadvantage app allows the policy holder to delete a trip if he or she was actually a passenger.
The TD program is offered only in Ontario and Quebec, said Francois Langevin, assistant vice-president of product innovation, but the company is looking to expand it into other provinces.
He estimated that about 40 per cent of new auto insurance clients sign up, adding that’s similar to the industry average for these programs in Canada.
“If you’re a driver who drives low kilometres, doesn’t speed, and doesn’t have jerky driving, that kind of thing, then you have a lower likelihood of making a claim so you get a discount based on that driving behaviour,” said Kaitlynn Furse, spokeswoman for CAA South Central Ontario, which offers a service called CAA Connect that uses a telematics device plugged into the car.
Auto insurance falls under provincial regulation and so the rules vary across Canada.
Quebec, Ontario, New Brunswick, Nova Scotia and Alberta, for instance, allow some but not all forms of usage-based insurance programs.
The other provinces and territories are considering allowing the programs but haven’t done so yet.
Provincial regulation has fallen behind the pace of technology, preventing insurers and clients from being able to harness the full potential of such programs, said senior policy adviser Rana Shamoon at the Insurance Bureau of Canada.
Canadians have far fewer choices than in the United States, where 49 jurisdictions have 10 or more insurers offering user-based programs, she said.
Fear that their information may be misused to raise their premiums or provide evidence against them in the event of a claim has hampered enrolment growth in telematics programs, said Andrew Lo, CEO of Kanetix Ltd., a company that helps consumers compare insurance products and rates.
According to a recent Kanetix survey, only 27.7 per cent of respondents in Ontario said they are interested in allowing their insurer to monitor their driving in return for discounted rates.
The Privacy Commissioner of Canada has identified potential issues with transparency and use of telematics data about driving habits, said Anne-Marie Cenaiko, manager of public education and outreach.