Are You Ready To Put A Tracking System In Your Car That Records How You Drive?

Usage-Based Insurance (UBI) is the latest buzz-term in Canadian insurance. 

In a recent Toronto Star article, UBI could cut the average annual cost of insuring a car by 15%--a welcomed state of affairs for GTA drivers who are known to pay the highest insurance rates in the country.  This two-step 15% decrease in rates is said to be about one-year away, dangling out before drivers the possibility of substantial savings. The Quebec insurance company Desjardin is currently the insurer offering a user-based program in Ontario, with three other companies having been approved by provincial regulators.
But what exactly is it?

UBI bases your insurance rates on empirical data collected from your actual driving habits through a GPS, or telematics, tracking system that records how you drive, including acceleration, braking, and overall speed. Additionally, it can capture information much more acute and even indemnifying, such as how quickly you accelerate and brake, whether you drift out of your lane, how sharply you take corners, and whether you drive mostly on highways, or quiet side streets. The data are then transmitted wirelessly directly to your insurance company that builds a profile of your driving habits over time, thus leading to your policy being adjusted or re-evaluated accordingly. Indeed, it is an incentive-driven system that lowers drivers’ rates the better they drive.

This is GM's MyLink Telematics system, first introduced in the 2012 Chevrolet Volt and Equinox 

Such a method differs from more conventional methods of ‘data collection’ that are most common, but indeed less accurate, such as statistics information garnered by questionnaires that are filled out, and often fudged, by the driver him/herself.

Some insurers describe UBI as a win-win for both drivers and insurers. Insurers win because there would be less accident claims and less money paid out. It is also touted as being able to record fraudulent insurance claims, such as staged accidents, etc.

And it’s a win for drivers, simply because the pure act of having one’s behaviour recorded in most cases will lead to a transformation of that behaviour, translating into better driving.  Who wouldn’t drive more carefully if one knew that every movement of the car were recorded and sent directly to the insurance company?

In Canada, the move to a telematic system has been rather slow, not only on the part of insurance companies, but also, according to the Toronto Star, FSCO (Financial Services Commission of Ontario) that regulates the insurance industry, the rationale being that it wants to ensure that consumers are protected and that the information is not in anyway misused by the insurance companies.

FSCO also regulates how premiums change over time according to the data recorded. In Quebec, where UBI has been ‘piloted’ since 2012, motorists receive a 20% discount on their monthly bill. However, FSCO will only allow rates to change annually when one’s insurance contract is renewed. Some claim that this taints the incentive of the program; that being able to cut one’s monthly premium by 20% will naturally lead to more focused, successful driving. However, according to FSCO, such monthly fluctuations can lead to a kind of volatility to the insurance system.

No doubt, UBI offers incentives and some drawbacks. For those who choose to take part in it, they will most likely see great discounts on their insurance rates, but the question remains how safe their information will be. According to a report by Canadianunderwriter.ca states that "The sharing of data, even if it's 'anonymized' represents a potential stumbling block for any UBI product." However, UBI also provides some very compelling incentives: better driving, lower monthly payments, and fewer collisions.

Which side of the fence are you on?