Why You Should Enrol in a Usage-Based Insurance Program

By Liam Lahey
A young woman driving her car at night.

If you’re keen to find a way to reduce the cost of your car insurance premium, you might want to consider enrolling in a usage-based insurance (UBI) program.

There are two types of UBI programs available in Canada, commonly known as pay-as-you-go and pay-how-you-drive, respectively. Each offers drivers the opportunity to pay less for car insurance, and both types provide an enrollment discount ranging from 5% to 10% right off the bat.

Based on telematics technology – a method of monitoring and gathering data from vehicles including location, driver behaviour, and activity – UBI is designed to promote good driving habits and give drivers more control over the price of their insurance by reducing premiums for drivers with safe driving habits and those driving fewer kilometres per year. Insurance Business Canada reports the global UBI market is projected to reach US$77.25 billion by 2026, as more drivers sign up to these programs.

And there appears to be an appetite to respond to consumers’ increasing interest in the technology, particularly in Ontario. In chapter one of its 2020 budget, the provincial government signalled it would allow insurers through the Financial Services Regulatory Authority (FSRA) to bring consumer-focused products forward quickly to help drivers control their premiums as part of its commitment to fostering a fully digital auto insurance system.

“[The] budget removes barriers for insurers who are committed to offering the innovative products that consumers are accustomed to receiving from other sectors,” said Kim Donaldson, Vice-President of the Insurance Bureau of Canada in Ontario, in a statement. “In addition, the budget fosters innovation by allowing insurers to bring new products to market that help drivers control their premiums, while also acknowledging a growing demand for a fully digital experience and removing restrictions on usage-based insurance products."

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Pay-as-you-go or pay-how-you-drive?

Pay-as-you-go insurance tracks how many kilometres you drive. For instance, CAA’s MyPace program is designed for motorists who drive less than 9,000 kilometres per year. With MyPace, drivers download an app onto their smartphones, and plug-in a USB telematics device in their car. They are charged for how much they drive. There’s a basic rate for coverage when the vehicle isn’t in use and another charge that applies for every 1,000 kilometres of driving. Kilometres are reloaded automatically in 1,000-kilometre increments in CAA’s pay-as-you-go model.

Pay-how-you-drive insurance tracks driving behaviour. Insurers such as Intact, Desjardins, Allstate and Pembridge all offer pay-how-you-drive programs through mobile apps. These types of UBI programs offer drivers the opportunity to save 25% to 30% on their premiums by tracking how safely they drive. They monitor things such as the average speed, distance travelled, the vehicle’s location and how smoothly you accelerate and brake.

Whether you drive infrequently or are a cautious driver, either option offers the potential to lower your insurance costs.

How else can you lower your premium?

Enrolling in a UBI program may not appeal to you. So, what other ways can you go about lowering your premium? Beyond obeying the speed limit and driving defensively, here are a few ideas:

  • Bundle your auto and home policies. Most insurers will knock off a percentage of your overall insurance bill if you buy both car and home or condo insurance from them.
  • Get winter tires. No matter where you live in Canada, it’s a good idea to have winter tires installed on your vehicle from November to April. Many insurers will give you a 5% discount for having them on your car.
  • Install an anti-theft device. Most modern vehicles come equipped with anti-theft systems, as well as a few driver-assist technologies. Many insurers will provide discounts if your vehicle has these features. If it doesn’t, consider installing an anti-theft device that’s recognized by your insurer.
  • Pay your premium annually. If you can do it, pay your premium in full at the get-go. A lot of insurers charge a small fee to administer payments every month.

Also, do a quick comparison of premiums and policies to find out if you can save money by switching car insurance providers. It never hurts to explore your options. Give it a go! You might find what you’re looking for in a few clicks.