What to tell your clients who are considering usage-based coverage

Inflation has Canadians shopping for lower rates on everything from cell phone service and groceries to, yes, auto insurance policies.

That’s led to some taking a look at usage-based auto insurance (UBI). “Many are drawn in by the promise of personalized discounts,” says rate aggregator Rates.ca, which notes overall adoption rates are still modest.

However, it also cites its own annual study that shows 88% of survey respondents who use UBI policies saying they’re likely to keep using them when they renew. Rates.ca, though, emphasizes drivers’ cost outcomes can “vary significantly” because savings are linked to how the insurance providers track and score users’ on-road behaviour.

“Drivers see usage‑based insurance as an easy win, and it can be,” says Daniel Ivans, an insurance broker who provides commentary for Rates.ca. 

“Participants gain more control of their premiums because it puts them firmly in the driver’s seat. If they keep steady habits and consistent routines, savings usually follow.”  

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He notes some pros and cons brokers might review during conversations with clients who say they’re considering a switch to UBI coverage:

• UBI insurance is based on telematics systems that monitor things like mileage, speed, acceleration patterns, braking, and sometimes what time of day a user is on the road.  Data is gathered via a plug-in device or a mobile app on the driver’s phone. Any discounts are based on a driving score generated from that data. 
• While some programs offer an initial discount when a customer enrolls, a user’s savings are ultimately tied to their driving score. “Drivers with safe habits and lower annual mileage typically qualify for the strongest discounts,” Ivans notes. 
• In some cases, UBI providers conduct an initial period of assessment and then apply a discount. Others track continuously during the policy term. Clients need to be aware of which type of tracking regime is being used by their auto insurer. 
• People who drive less – such as retirees, remote workers, or people with short commutes – tend to “see the greatest value because reduced mileage plays a significant role in scoring,” says Ivans. 
• For higher-mileage drivers or people who aren’t comfortable having their data collected continuously, a standard auto policy that doesn’t require telematics tracking may be a better option. 

“It’s normal for drivers to have questions about new technology, and brokers often help price‑focused consumers understand the benefit of participating,” says Ivans.

“The apps themselves are simple and transparent [and] clearly show how driving habits influence the premium. Most user concerns come up in conversation before joining, not once they’re enrolled.”