There are many ways you can save on your car insurance, like using winter tires when the temperature drops or paying your premium upfront at the beginning of the year. But, would you let your insurance company track your driving habits if it meant you could qualify for additional savings?
Drivers that sign up for Usage Based Insurance (UBI) plug a device into their car that tracks acceleration, braking, distance driven and the time of day they drive, and gives that information to their insurance company. In return, drivers often get a small discount on their insurance upfront, and the possibility of a larger discount when it’s time to renew – if the data shows that they’re a safe driver.
One study asked Canadians how they feel about this type of car insurance, and the results were mixed. Six out of ten Canadians would try out UBI, if there was a chance they could pay less for their coverage. And seven out of ten Canadians thought that UBI would make them a safer driver. At the same time, respondents were worried that their driving data could be used against them to deny a claim or cancel a policy, that their information would be shared with other auto insurers, or that they would face an increase in their insurance premium. Respondents were also concerned that their driving habits wouldn’t be accurately captured.
So what’s fact and what’s fiction? Data collected from a UBI program can only be applied to determine if you qualify for a discount, not to raise your premium. The Financial Services Commission of Ontario lays out the rules that protect drivers who sign up for UBI. Under these rules, the data that your insurance company collects cannot be used to decline, cancel or increase the cost of your insurance coverage. In addition, any information collected cannot be shared with another party without your express consent. The information can only be used to set a discount, review rating criteria or detect and prevent fraud and manage claims.
UBI does make people safer drivers. One study done by the University of British Columbia looked at data from 30,000 drivers and found that many of them, especially younger people and women, improved their driving behaviour as a result. The same study showed that most drivers did qualify for a discount; however since this is a voluntary program, it is likely that only good drivers offered to participate.
Despite the upside to UBI, one expert notes that while insurance companies must follow privacy rules, they could be compelled by the courts to turn over the data they collected from your vehicle as evidence – for example, that you were driving over the speed limit at the time of an accident. And a limitation of usage-based insurance is that your provider won’t distinguish between different drivers of your car, so although bad driving won’t affect your rate, you might not be eligible for a discount if your teen driver is speeding around town.
Despite concerns over privacy, the study of Canadian attitudes showed that only nine percent of respondents would refuse UBI no matter how large the potential discount.Thirty percent of Canadians would switch if they could save between $100-$249; 26 percent would switch if they could save between $250 and $500; and 13 percent would only switch if they could save $500 or more.
The decision, ultimately, is a personal one, but UBI seems to be the future of car insurance. Experts estimate that over 140 million people will be using usage-based insurance by 2023; so how much of a discount would it take for you to join their ranks?