Usage-based car insurance (UBI), often referred to as “telematics insurance” or “pay-how-you-drive insurance,” tailors car insurance premiums based on an individual’s driving behavior. Instead of using traditional methods of assessing risk (like age, gender, and vehicle type), UBI relies on real-time data collected from a device installed in the driver’s car or through a mobile app.

How Does Usage-Based Insurance Work?

In Ontario, Canada, usage-based insurance programs have been approved and are offered by various insurance companies. Here’s how it typically works in Ontario:

1. Enrollment: The driver enrolls in a UBI program through their insurance provider.
2. Data Collection: The insurance company provides the driver with a telematics device to be plugged into the car or uses a mobile app to track driving behaviors. This device/app will then monitor various driving metrics like speed, hard braking, rapid acceleration, distance driven, and the times of day when the vehicle is operated.
3. Feedback: Many insurers offer online portals or apps where drivers can view their driving data and receive feedback on their driving habits. This feedback can help drivers understand where they might need to make changes to qualify for bigger discounts.
4. Premium Adjustment: Depending on the data collected, the driver might receive discounts on their insurance premiums for safe driving behaviors. Conversely, if the data shows risky driving behavior, it’s possible (though less common) for premiums to increase. Some programs guarantee that rates won’t go up based on the data they collect, but only offer discounts for good driving.
5. Privacy: Concerns have been raised about privacy with UBI programs, but insurers typically state that they don’t use the data to track a driver’s location or sell the data to third parties. In Ontario, the Financial Services Commission of Ontario (FSCO) sets out guidelines ensuring that insurance companies handle the data responsibly.

Participation in UBI programs is usually voluntary. Drivers in Ontario interested in UBI should reach out to their insurance provider for specific details, as programs and potential discounts can vary between companies.

Usage-Based Auto Insurance Cost in Canada

Usage-based auto insurance, also known as pay-as-you-go car insurance, bases the premiums on the driver’s actual driving behavior, such as the number of miles driven, the time of day when driving occurs, and how the car is driven. The following are examples of the average annual and monthly costs of usage-based auto insurance in Canada for a 35-year-old male driver with a clean driving record and a 2019 Toyota Corolla:

1. Ontario:

• Average annual cost: $1,800 ($150 per month)

Major cities:

• Toronto
  • Average annual cost: $1,950 ($163 per month)
• Ottawa
  • Average annual cost: $1,700 ($142 per month)
• Mississauga
  • Average annual cost: $1,900 ($158 per month)
• Brampton
  • Average annual cost: $2,050 ($171 per month)
• Hamilton
  • Average annual cost: $1,750 ($146 per month)

2. Quebec:

• Average annual cost: $1,500 ($125 per month)

Major cities:

• Montreal
  • Average annual cost: $1,700 ($142 per month)
• Quebec City
  • Average annual cost: $1,400 ($117 per month)
• Laval
  • Average annual cost: $1,600 ($133 per month)
• Gatineau
  • Average annual cost: $1,500 ($125 per month)
• Longueuil
  • Average annual cost: $1,550 ($129 per month)

3. Alberta:

• Average annual cost: $2,000 ($167 per month)

Major cities:

• Calgary
  • Average annual cost: $2,100 ($175 per month)
• Edmonton
  • Average annual cost: $1,900 ($158 per month)
• Red Deer
  • Average annual cost: $1,800 ($150 per month)
• Lethbridge
  • Average annual cost: $1,700 ($142 per month)
• Medicine Hat
  • Average annual cost: $1,600 ($133 per month)

4. British Columbia (ICBC):

• Average annual cost: $2,100 ($175 per month)

Major cities:

• Vancouver
  • Average annual cost: $2,300 ($192 per month)
• Surrey
  • Average annual cost: $2,200 ($183 per month)
• Burnaby
  • Average annual cost: $2,100 ($175 per month)
• Richmond
  • Average annual cost: $2,100 ($175 per month)
• Abbotsford
  • Average annual cost: $1,800 ($150 per month)

5. Manitoba:

• Average annual cost: $1,700 ($142 per month)

Major cities:

• Winnipeg
  • Average annual cost: $1,800 ($150 per month)
• Brandon
  • Average annual cost: $1,600 ($133 per month)
• Steinbach
  • Average annual cost: $1,500 ($125 per month)
• Portage la Prairie
  • Average annual cost: $1,500 ($125 per month)
• Thompson
  • Average annual cost: $1,600 ($133 per month)

It’s important to note that these are just examples, and actual usage-based auto insurance costs can vary depending on the driver’s driving behavior, the insurance company, and the specific policy details. It’s always a good idea to shop around and compare quotes from multiple insurance companies to find the best coverage and rates for your individual needs.

Companies offer usage-based insurance in Canadian provinces

1. Intact Insurance: Through their “my Driving Discount” program, Intact offers UBI for drivers in several provinces.
2. Desjardins Insurance: Their “Ajusto” program is available in Quebec and Ontario. It tracks driving habits using a mobile app or a telematics device.
3. Allstate Canada: The “Drivewise” program by Allstate is another UBI offering where drivers can earn discounts based on their driving habits.
4. The Co-operators: Their “en-route Auto Program” uses a device installed in the vehicle to track driving habits and potentially offer discounts.
5. TD Insurance: Their “MyAdvantage” program measures driving behaviors using a mobile app to determine potential discounts.
6. CAA: The “MyPace” program from CAA isn’t traditional UBI in the sense of monitoring driving habits, but it does allow drivers to pay for insurance based on the number of kilometers they drive.
7. Belairdirect: They offer a program called “Automerit” which tracks driving through a mobile app.

These are just a few examples. The availability of UBI programs can vary by province, and not all programs are available everywhere. Additionally, the specifics of each program, like how data is collected, how discounts are determined, and how data is protected, can vary between companies.

How Much Will I Save By Using Usage-Based Insurance?

The savings associated with usage-based insurance (UBI) largely depend on your driving habits, the insurance provider’s criteria, and the specific UBI program in which you’re enrolled. In general, safer driving behaviors can lead to more significant discounts, while riskier behaviors might result in smaller discounts or none at all.

Here are some general points to consider:

1. Initial Enrollment Discounts: Many insurance companies offer an initial discount just for enrolling in their UBI program. This discount is typically applied to the policy premium upfront, before any driving data is collected. This initial discount can range from 5% to 10% or more, depending on the insurance company and region.
2. Potential Savings: After the initial enrollment period, savings are typically based on the driving data collected. Many companies promote potential discounts of up to 25% or 30% for the safest drivers. However, the average savings for most drivers tends to be lower, often around 10% to 15%.
3. Driving Behaviors Monitored: UBI programs typically monitor factors like hard braking, rapid acceleration, speed, the times of day you drive, and total mileage. Some programs might also consider cornering or how you use your phone while driving.
4. No-Penalty Guarantees: Some UBI programs guarantee that your rates won’t increase based on the data they collect, meaning you can only benefit from potential discounts. However, others might increase your rates for risky driving behaviors.
5. Duration of Monitoring: The duration of monitoring can vary by program. Some might assess your driving over a few months, while others might continually monitor your habits for as long as you’re enrolled in the program.
6. Variability by Region: The savings and specifics of UBI programs can vary by region due to regulatory differences and local driving conditions. For instance, the potential savings in one province or state might be different from another.

What Are The Benefits of Usage-Based Insurance?

Usage-based insurance (UBI) in Ontario, and other regions, offers several benefits to both consumers and insurers. Here are some of the primary advantages:

1. Potential Savings: One of the most attractive benefits of UBI for consumers is the potential for savings. Safe drivers, in particular, can see significant discounts on their premiums based on their driving habits.
2. Personalized Premiums: UBI allows for more personalized insurance pricing. Instead of being grouped into broad categories based on factors like age or location, premiums are tailored to an individual’s actual driving behavior.
3. Driving Feedback: Many UBI programs provide feedback on driving habits through mobile apps or online portals. This feedback can be educational for drivers, helping them understand risky behaviors and how to improve their driving to qualify for larger discounts.
4. Encourages Safe Driving: The potential for savings acts as an incentive for drivers to adopt safer driving habits, which can lead to fewer accidents and safer roads overall.
5. Low-Mileage Discounts: For those who don’t drive often, UBI can be especially beneficial. Some programs offer discounts based on the total distance driven, which can benefit occasional drivers or city dwellers who primarily use public transport.
6. Flexibility: UBI is generally voluntary. Drivers who believe they can benefit from it can opt-in, while those who prefer traditional insurance models can stick with what they know.
7. Transparency: With the data available, consumers can see precisely why they received a particular discount or why their premium is set at a specific rate. This transparency can lead to increased trust between the insurer and the insured.
8. Potential for Broader Coverage: As insurance companies gather more data on driving habits, they may be able to offer innovative coverage options tailored to individual needs.
9. Technological Integration: With the rise of connected vehicles, UBI can easily be integrated into modern cars without the need for additional devices. This seamless integration can further promote the adoption of UBI.
10. Benefits for Insurers: From an insurer’s perspective, UBI can lead to better risk assessment, allowing them to price policies more accurately. Additionally, encouraging safer driving habits can lead to fewer claims, benefiting the insurance company.

What Are The Cons of Usage-Based Insurance?

While usage-based insurance (UBI) offers several benefits, there are also some potential drawbacks and concerns that consumers should be aware of:

1. Privacy Concerns: One of the primary concerns about UBI is the collection and storage of driving data. Some drivers are uncomfortable with the idea that their insurance company is monitoring their every move on the road. Even if the insurer promises not to use the data for anything other than premium calculations, there are still concerns about data breaches or misuse.
2. Potential for Higher Rates: While many UBI programs emphasize potential savings, poor driving habits could lead to higher premiums for some drivers, especially in programs where rates can increase based on the collected data.
3. Technical Issues: Telematics devices or apps can sometimes malfunction or misinterpret driving events. A hard brake due to an animal running across the road might be recorded similarly to a hard brake because of inattentive driving.
4. Limited Savings: Not everyone will save with UBI. Some drivers might find that their driving habits only yield minimal discounts, making the monitoring feel invasive for little financial gain.
5. Short Monitoring Period: Some UBI programs might only monitor driving for a few months before determining a discount. This short period might not be representative of a driver’s typical behavior, leading to inaccurate premium adjustments.
6. Inconvenience: Having to install a device in your vehicle or constantly run an app on your phone can be inconvenient for some users.
7. Battery Drain: If a mobile app is used for monitoring, it might drain the phone’s battery faster, especially if it requires the phone’s GPS to be active.
8. Data Limitations: Using a mobile app could also consume data from a user’s plan, potentially leading to overage charges if not on Wi-Fi.
9. Lack of Standardization: UBI programs vary between insurance companies. What one insurer might consider safe driving, another might deem as risky. This lack of standardization can be confusing for consumers.
10. Young Drivers: New drivers, especially teens, might feel pressure or anxiety knowing their driving is constantly monitored, which could impact their confidence on the road.
11. Dependence on Technology: If there’s a technological error or a device fails to record data accurately, it might not reflect the driver’s actual behavior, leading to potential disputes with the insurer.

For those considering UBI in Ontario or elsewhere, it’s essential to weigh the potential benefits against these drawbacks and choose the insurance model that best fits their comfort level and needs.

What Does Usage-Based Insurance Cover?

Usage-based insurance (UBI) in Ontario, as in other jurisdictions, is primarily a method of determining premiums based on driving behavior. It’s not a distinct type of coverage on its own. Instead, it’s an approach to pricing the standard coverages that auto insurance policies offer. The actual coverages remain consistent with traditional auto insurance policies.

Here are the typical coverages included in an auto insurance policy in Ontario:

1. Third-Party Liability: This covers you if someone else is killed or injured or their property is damaged due to your negligence while driving. It will pay for legitimate claims against you up to the limit of your coverage, and pay for the cost of settling claims.
2. Statutory Accident Benefits: This provides benefits if you, your passengers, or a pedestrian is injured or killed in an auto accident, regardless of who was at fault. It can cover medical treatment, income replacement, and other benefits.
3. Direct Compensation – Property Damage (DC-PD): Covers damage to your vehicle and its contents, and loss of use of your vehicle and its contents, under certain conditions. To claim under DC-PD, the accident must occur in Ontario, involve one or more other vehicles, and at least one of the other vehicles must be insured by a company that has signed the DC-PD agreement.
4. Uninsured Automobile: Protects you if you’re involved in an accident with an uninsured driver or if you’re the victim of a hit-and-run.
5. Collision or Upset: Covers damage to your vehicle when it’s involved in a collision with another vehicle, object, or if it rolls over.
6. Comprehensive: Covers damage to your car caused by events like theft, vandalism, or natural disasters.

The UBI program you’re enrolled in will monitor your driving behaviors (like speeding, hard braking, or the time of day you drive) and adjust your premiums based on this data. Depending on the insurer and the specific UBI program, you might receive a discount on one or more of the coverages listed above.

Usage-Based Auto Insurance FAQs

Q: What is usage-based auto insurance?

A: Usage-based insurance (UBI) is a type of auto insurance where premiums are determined by monitoring the insured’s driving habits. This is usually done through a telematics device installed in the car or a mobile app. The data collected can include factors like speed, distance driven, hard braking, and the times of day the vehicle is used.

Q: How can UBI save me money?

A: If the data collected indicates you’re a safe driver (e.g., you don’t speed, you brake gently), you might be eligible for discounts on your insurance premium. The exact amount of savings varies by insurer and individual driving habits.

Q: Is participation in UBI programs mandatory?

A: No, participation in UBI programs is typically voluntary. Drivers can choose whether they want to be part of such a program or stick with traditional insurance pricing.

Q: Will my premiums go up if I drive poorly?

A: Some UBI programs offer a “discount-only” model where your premiums won’t increase based on the data, but you might not earn a discount. Other programs might increase rates for risky driving. It’s essential to understand the terms before enrolling.

Q: Is my data safe?

A: Insurance companies in Ontario are subject to privacy regulations that require them to protect your personal data. Most insurers emphasize that they don’t sell the data or use it for purposes other than determining discounts. However, always review the insurer’s privacy policy to understand how your data is managed.

Q: What if I don’t drive often?

A: Some UBI programs, especially those that track total distance driven, can benefit infrequent drivers by offering lower rates based on reduced mileage.

Q: Can I access my driving data?

A: Many insurers offer online portals or mobile apps where participants can view their driving data and feedback. This can be a helpful tool to understand your driving habits and areas for improvement.

Q: What happens if the monitoring device or app malfunctions?

A: If you suspect a malfunction, you should contact your insurance provider. They may provide guidance on troubleshooting, replacing a device, or ensuring that your driving data is accurately recorded.

Q: Are all UBI programs the same?

A: No, UBI programs can vary between insurance companies. While the fundamental concept is similar, the criteria for earning discounts, the type of data collected, and the technology used can differ. It’s a good idea to compare different programs to find the best fit for your needs.

Q: How long will my driving be monitored?

A: The monitoring period varies by insurer. Some might assess driving over a few months, while others might continue monitoring for as long as you’re enrolled in the program.

These are just a few common questions about UBI in Ontario. If you’re considering enrolling in a UBI program, it’s crucial to thoroughly research and consult directly with insurance providers to get detailed and up-to-date information.

Q: Can I switch back to traditional insurance if I don’t like UBI?

A: Yes, typically you can switch back to traditional insurance or change your policy. However, it’s essential to communicate with your insurance provider and understand any terms or conditions that might apply.

Q: Will other drivers of my vehicle affect my UBI data and discounts?

A: Yes, the telematics device or app usually tracks the driving habits of the vehicle, not the specific driver. So, if other people drive your car, their driving behavior will impact the data collected and potentially your discounts.

Q: Is there a fee to install or use the telematics device?

A: This varies by insurer. Some might offer the device for free as part of the UBI program, while others might charge a fee. Some programs that use mobile apps might not have any additional costs, but it’s always good to ask about potential fees or charges.

Q: What happens if I remove the telematics device before the monitoring period ends?

A: Removing the device prematurely might disqualify you from potential discounts and could be considered a breach of the UBI agreement. It’s essential to keep the device installed for the entire monitoring period or consult your insurer if you encounter issues.

Q: Can the insurance company track my location?

A: While the technology can technically track location, many insurers emphasize that they do not use UBI to monitor where you go. Their primary interest is in how you drive, not where you drive. However, always review the insurer’s privacy policy to understand what data is collected and how it’s used.

Q: Will my UBI data be used in claims investigations?

A: Some insurers might use UBI data as part of their claims investigation process, especially if it can provide insights into an accident. It’s essential to understand how your data might be used beyond premium calculations.

Q: Can I use UBI if I have an older car?

A: Most UBI programs are compatible with vehicles manufactured in the late 1990s and beyond. However, compatibility might vary, so it’s a good idea to check with the insurance provider to ensure your vehicle can support the telematics device.