Higher premiums driving motorists to usage based insurance

By HUB SmartCoverage Team on June 8th, 2023

More Canadian drivers are turning to usage-based insurance (UBI) to try and save money on their premiums, reveals new data from rate aggregator RatesDotCa.

Quotes for UBI from the rate comparison site were up 18.22 per cent year-over-year, RatesDotCa said. The data showed quotes for UBI have been rising since September 2022. Quotes for UBI increased 54.64 per cent month-over-month in January, and 36.8 per cent month-over-month in February.

UBI uses telematics to monitor a driver’s behaviour. Essentially, it’s the use of smart technology to monitor vehicles. It can be a smartphone app, Bluetooth devices or diagnostic or black boxes. Data collected from the sensors measure such things as speed, trip distance and time, location, harsh braking and cornering, and distracted driving.

Discounts for signing up

UBI gives drivers a rating or score at the end of the data collection period. Safer drivers or those who have improved may be eligible for an insurance discount of up to 30 per cent upon renewal. What factors are tracked and used to lower premiums differ by insurer, and some will even offer a small discount just for signing up.

RatesDotCa attributed the increased interest in UBI to rising auto insurance premiums.

In Ontario, premiums have been rising since 2022. The rate aggregator predicted another 7- to 8-per-cent increase in 2023 Q3. Some drivers may have already seen the effects, while others are likely to see a higher premium upon renewal of their policy.

In Alberta, despite a recent rate freeze, drivers will still see an increase if their insurer was previously approved for one, RatesDotCa added.

“With auto insurance premiums steadily on the rise and inflation impacting consumers across the board, Canadians are beginning to open up to creative cost-saving measures,” said RatesDotCa insurance expert Daniel Ivans in an interview with Canadian Underwriter. “UBI can be a very powerful tool for responsible drivers, but knowing what kind of UBI policy works best for a driver’s personal situation is important in order to make the most of the savings available.”

Some UBI offers pay-as-you go policies, which tie premiums directly to the amount the vehicle is used, RatesDotCa said. Other UBI policies are pay-how-you-drive, which use onboard tracking technology or an app to monitor driving habits and assess the level of risk posed by the driver.

Although use of telematics in the auto industry has been around for about a decade, “there seems to be a growing interest, with more Canadian drivers now opting for it,” RatesDotCa said.

Popular with younger drivers

UBI appears to be more popular with a young demographic, with nearly 55 per cent of drivers aged 20 to 29 opting for the UBI discount (compared to 40% aged 30-39 and 30% of drivers aged 60 and older in January).

As well, figures show UBI quote interest from male drivers in the 20-29 age group jumped 75 per cent in January and 68 per cent in February, compared to females of the same age, with 65 per cent interested in UBI in January and 57 per cent in February.

RatesDotCa said it appears a young demographic is much more comfortable with using smart technology-based systems. Or possibly, the aggregator added, amid privacy concerns of sharing telematics data with insurance companies, UBI hasn’t found favour with older drivers.

If you’re interested in finding out more about UBI and how it will affect your premiums, contact your insurance broker.

-With files from Canadian Underwriter, RatesDotCa