Driving data may drive down premiums
Looking for a way to reduce your insurance premiums? Telematics may be the answer.
What’s that you may ask? Put simply is usage-based insurance (UBI) or pay-as-you-drive gives drivers options on how their premiums are calculated. While it was only introduced in 2013, many insurance companies use it today and more will likely follow suit.
Telematics technology customizes insurance to your pattern of driving. It works by monitoring your real-time driving behaviours to provide an objective picture of your driving habits. That can include how far you drive or how you drive.
The better your driving habits or if you improve your driving behaviour, you can potentially save on your premiums. According to the Insurance Bureau of Canada, a “telematics device creates an objective, personalized profile based on specific criteria.”
The telematics program gives you a small wireless device that acts as information and communication technology that can be easily installed in your car’s diagnostic port – typically under the steering wheel. In some cases, it’s even easier because all you have to do is download an app.
The data collected is subject to strict privacy policies and is not used for any other purpose other than allowing the insurer to analyze it to determine savings. In Ontario, telematics programs must be approved by the insurance regulator, the Financial Services Commission of Ontario (FSCO).
The are two basic types of usage-based insurance rating include pay-as-you-drive (also called pay-as-you-go) and pay-how-you-drive. Both options are available in Canada but availability will vary by insurance provider. Let’s examine them below:
Pay-as-you-drive/Pay-as-you-Go Insurance - This is the newest option and was introduced in 2018. Your base rate that factors in the kind of car you drive, your driving record and insurance history is calculated. Once your base rate is determined, you’re then given a price for how much each 1,000 kilometres of travel will cost you. Mileage is tracked through the telematics device. If you use up the kilometres, they reload automatically.
Pay-how-you-drive Insurance -Again, once the telematics device is plugged into your car or an app is downloaded onto your smartphone, the information gleaned is more than how far you drive. It also takes in to account:
- Hard braking and rapid acceleration
- Speeding
- The time of day you drive
For drivers who exhibit safe behaviours on the road, the reward for sharing your information is discounted insurance rates. For drivers who don’t, the information is not used to raise your rates but disqualifies you from any possible discounts.
Usage-based insurance is optional and drivers can decide for themselves whether or not such a policy makes sense. Safe drivers may benefit greatly from a pay-how-you-drive insurance policy. Those who drive infrequently may do well on a pay-as-you-drive policy. If your insurer offers it, all you have to do is answer yes when asked if you would consider using a device in your vehicle that tracks your driving performance.
It’s also interesting to note that a telematics provider interviewed by Insurance Business Magazine America said the technology has other benefits.
Claims benefits
“Today claims organizations are blind. They don’t do anything until a policyholder files a claim,” said Nino Tarantino, CEO of Octo Telematics North America, in an interview. “With telematics, they know there was an accident or there was a bodily injury event in real-time so they can be proactive.”
That’s because insurers can determine in real-time where the car was damaged, the extent of the damage, the probability of bodily injury and what other car was involved, Tarantino said.
The result, he added, is a reduction in claim resolution time by close to 50 per cent. Higher customer satisfaction and fewer loopholes for fraudsters are just a few of the other perks, the CEO said.
Talk to your insurance broker if you are interested in telematics. It may be worth it!