Telematics Insurance, or Usage-Based Insurance as it’s sometimes called, is a new addition to the insurance market here in Canada. If you happen be a young driver or live somewhere excessively urban, chances are you’re paying extortion-level rates for the privilege of driving. While you might have railed against your fate of $2500 insurance premiums, there hasn’t been a lot of options for you.
Fear not! There is now a choice! You can now liberate yourself from the shackles of Louie-the-Loan-Shark insurance rates! Well, you can sort-of liberate yourself. You can save a few dollars but, in exchange, you’ll be relaying a continuous flow of information on your vehicular whereabouts 24 hours a day, 7 days a week.
Okay, maybe I should share a little more information and a little less attitude. Let’s back this up a bit…
What is Telematics Insurance?
Telematics Insurance combines telecommunications and global positioning system technology and packages it as a way to save you money on insurance premiums. In other words, you allow the insurance company to monitor your driving habits in exchange for a discount on your policy. If you prove to be a good driver, they adjust your premiums accordingly.
While Telematics Insurance has been rolling around the United States for over a decade, Canada is slower to adopt this technology. Currently, Ontario and Quebec are the only provinces that offer Telematics Insurance policies. Alberta is seriously eyeballing Telematics Insurance implementation and Saskatchewan has a pilot project for motorcycle drivers. British Columbia is taking a ‘wait and see’ approach while Manitoba and our Maritime friends have yet to even broach the topic in a serious way.
How does Telematics Insurance work?
Your company of choice gives you a little telecommunications device, a little black box that is installed into a diagnostic port in your car. The little black box will track information on your driving habits:
- When/where you drive.
The information collected varies from company. Some collect data on cornering, acceleration and braking but don’t bother with speed. Others maybe collect data on the when/where you drive and cornering, braking, and acceleration. It all depends on what the insurance company thinks is important when they are making a decision about you as a driver.
Once this data is collected, it is transmitted over cellular networks to a central collection facility where it is analyzed. They look at all the variables they collect and build a driver profile that they compare against their benchmark, or standard, for someone in your category (based on age, gender, location and other demographics).
Generally, if you don’t Formula One off every stop line and corner like you’re on rails, there’s a good chance you can receive a discount. This can be especially important for young, inexperienced drivers or people living in cities who pay higher rates to drive. This leads us to our next question.
What can Telematics Insurance do for me?
Well, it can do a lot as it turns out.
On the safety front: Many of the insurance companies that offer TI also make all the data they collect on you available as a driver profile to you. It can give you great feedback on where you’re going both right and wrong with your driving.
Are you cornering too fast? Do you get a little lead foot on your way home after work? Are you forced to slam on the brakes a lot when the light turns red? Driving gets to be a really unconscious exercise after so many days, months, or years behind the wheel and the feedback can help you start thinking critically about your actions. A 2014 report from Ingenie & RoadSafe shows that young drivers with a TI policy show a 40% fall in crash risk compared to those without this coverage.
On the money front: There is, of course, the discount that insurance companies can offer you on your premiums. You can save from 5% to 25% and those numbers will certainly add up if you fall into the latter half of that range. But in order for these discounts to be useful, you have to be able to understand how they are calculated.
So, how do insurance companies determine these discounts? Well, it’s different for each company but I can give you an example: Desjardins, a large Quebec insurance company, offers discounts on distance traveled annually (up to 10%), duration and regularity of acceleration and hard braking (up to 10%), and time of day driven (up to 5%).
In addition to the discounts, having access to your good driving data gives you a bargaining chip. For those provinces or states with privatized auto insurance industries, shopping around your driving profile to different insurers might land you an even better rate.
What’s the down side of Telematics Insurance?
Weeeeellll, that can be a problem. The most problematic aspect of TI is the collection, storage, and disclosure of all this private information. According to the Ingenie & RoadSafe report mentioned earlier in this post, over 200 million miles has been logged by young drivers since 2011. That is a lot of information about the comings and goings of people in Canada.
Combine all that with the fact that the courts can acquire that information if it’s pertinent to a criminal case. It can also be ruled producible in civil matters if the judge rules it’s relevant. In these cases, the insurance company doesn’t get to decide if your information is private.
Can bad driving impact my premiums?
It depends. Right now, Ontario insurance regulators doesn’t allow insurers to penalize you for poor driving patterns. Insurance companies can only discount your rate for good driving and help support the other drivers with improving their habits on the road. However, Quebec’s Autorité des marchés financiers is all over increasing premiums for shit drivers in their province. So, you’re going to want to be clear about how insurance companies can reward and/or consequence you for your behaviour on the road.
Final Thoughts on Telematics Insurance
The research suggests that Telematics Insurance has done some great things for making the road a safer place to be. Statistics from other countries using telematics shows that it helps drivers reduce risky behaviours and decreases collision rates.
Also, it’s always great to save money and the discounts will probably really help out young drivers facing high insurance rates and urban-dwellers paying insane-o premiums. Twenty percent of my premium is $200 a year. Personally, I can think of about 2000 things I can do with $200 that doesn’t involve my insurance company.
However, that is all trumped by the Panopticon I-can-see-you creep factor of being tracked all the time. I don’t really have anything to hide but that doesn’t mean I’m keen to share everything either. If I want to hit every porn store from Toronto to Tucson, I’m happy to do that without Meloche Monnex Insurance eagle-eying that shit from satellites in space.