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Yea or Nay: Experts thoughts on usage-based auto insurance

Toronto, Ontario — Usage-based auto insurance (UBI), where insurance companies monitor a person’s driving behaviour with telematics and provide discounts for safe driving is starting to gain traction in Canada— but not without skepticism. 

While lots of people are fine with having their driving habits monitored for a reduction in insurance rates, others are concerned about privacy issues, as well as penalties for risky driving.

The staff at LowestRates.ca spoke to a few industry experts to find out what their thoughts were on UBI. 

Pieter Louter, CEO of Onlia, a home and auto insurance provider, says its user-based auto insurance is more focused on rewarding drivers than penalizing them. 

“We believe in motivation over discouragement and rewards over penalties,” says Louter. “Not all companies follow this philosophy and some drivers who opt for pay-as-you-drive insurance may see an increase in what they pay if they take too many risks.”

The data tracked on Onlia Sense, which includes location, how fast your vehicle accelerates, and the times of day you drive, are not tied to a customer’s premium, which means information from the app isn’t used to influence a consumer’s policy, says Louter. 

Elliott Silverstein, director of government relations at CAA Insurance, says customers who choose its UBI program, called CAA MyPace, are charged a base rate for insurance and an additional amount for every 1,000 kilometres driven. 

“As many households are closely managing expenses, having a program like CAA MyPace helps drivers save considerably on their auto insurance while retaining the full coverage they’d enjoy on a traditional auto insurance policy,” says Silverstein. Noting that a number of CAA MyPace users have saved roughly 50 percent of the cost of a traditional auto insurance policy. 

Even CAA Insurance’s president, Matthew Turack, uses CAA MyPace to save on his auto insurance. 

And he’s not the only one. Some insurance experts like the idea of having their driving habits monitored for a discount and aren’t worried about privacy issues. 

The auto insurance industry is highly regulated, said Alex Guthrie, general manager and insurance advisor at Guthrie Insurance Brokers Ltd., with strict privacy laws. 

“A regulated insurer would be foolish to use the collected data in any other way than for the purpose of rating an insurance risk,” he says. 

“Wearing my consumer hat, I would definitely use UBI,” says Guthrie “Yes the insurer will be collecting data from me, but so is every other company or computer program/app/social media site I interact with, and many of these without my express consent.” 

However, UBI may not be for everyone. 

“I’m not sure I would like UBI,” says Harjit Sihota, regional director of InsureBC. “I drive a lot from office to office and that would mean a higher premium for me.” 

Sihota says car insurance providers should offer more usage-based options for those who spend more time behind the wheel. The 10 percent discount for driving fewer than 5,000 kilometres a year that ICBC offers, for instance, is great if you have multiple vehicles or live in a community in which you don’t need to drive much. 

Adam Mitchell, president of Mitchell & Whale Insurance Brokers Ltd. says UBI isn’t for him. “I enjoy fast cars. Although I’m a safe driver, I do enjoy starting fast off a red light from time to time, as long as traffic is light and I have good visibility. I could get surcharged for that.”

But that doesn’t mean UBI isn’t a good idea, he says. “I can see how UBI would have been really helpful when I was 18 and paying five grand a year for insurance. It’s a great example of how the insurance industry is innovating to offer solutions to suit different drivers with different needs and wants.”

Better regulations that limit insurance providers in how they can use the data and allow customers to own their data is key, he says. “If I have five years of great UBI data with Intact, I should be able to use that to my advantage if I’m shopping for another insurer.”

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