Telematics insurance in Canada, better known as usage-based car insurance (UBI) and pay-as-you-go car insurance, is not a particularly new offering for Canadian motorists. First seen in 2013, it’s based on a simple premise – pay lower premiums if you drive less and drive safely. This is just one way to obtain the cheapest car insurance.
Though pay-as-you-go auto insurance has been around for almost 10 years, its uptake had been relatively low – until COVID-19. With cars parked in driveways for days, if not weeks, it’s no surprise people are trying to find ways to cut their insurance costs. No wonder the CAA says pay-as-you-go insurance has grown 300% in 2020 alone.
It may sound like an easy way to save money, but do you know the pros and cons of opting for pay-as-you-go insurance?
What Is Pay-As-You-Drive Insurance in Ontario?
Telematics insurance in Canada offers consumers lower premiums for safer driving and less driving. It’s why it’s also called ‘low-mileage car insurance’ in Ontario, since it can lower insurance premiums if you drive infrequently or make short trips.
How Does Pay-As-You-Go Car Insurance Work?
Unlike traditional auto insurance, pay-as-you-go car insurance uses vehicle tracking to monitor driving behaviour. The setup consists of a module that connects to the vehicle’s onboard diagnostics port (OBDII) to collect data and (possibly) the driver’s smartphone to transmit the data.
The device is able to capture a wide range of information about driving behaviour, including:
- Distance driven
- Steering input
- Vehicle faults
- And more
By monitoring these aspects, the insurance company can reward safe driving by lowering insurance premiums. Until recently, drivers could not be penalized for unsatisfactory driving, untill Ontario changed its laws (we’ll discuss that below).
Pay-as-you-go auto insurance has been growing in popularity over the last few years. Some industry estimates say drivers opting for telematics insurance in Canada have risen 25-40% every year on average.
Before you rush to sign the dotted line, find out what are some potential advantages and disadvantages of pay-as-you-go car insurance.
Pay-As-You-Go Auto Insurance: Pros
Safer driving: This is easily the biggest benefit of usage-based car insurance in Ontario. It can encourage you to accelerate and brake more smoothly, and discourage bad driving habits such as speeding, running stop signs, and weaving in traffic.
Lower premiums: Avoid maneuvers that the insurance company deems unsafe and you could save as much as 30% on what you would have paid for standard auto insurance.
Faster claim resolution: Involved in a collision? Claims adjusters have access to a wealth of information that can help resolve claims faster and potentially more accurately (though any experienced car accident lawyer will tell you that’s not always the case).
What to Do If You Are Involved in a Car Accident?
Whether you’ve gone with traditional auto insurance or telematics – drive safe! Safer driving will help you lower your premiums and reduce the risk of collisions regardless of the type of insurance you choose.