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Pay as go cell phone plans, drive-thru coffees, pay as you go vacation trips the list goes on. A lot of us do love to pay for a service after we use it. What’s next? Car insurance! Yes indeed, that is possible with Usage-Based Insurance (UBI) for automobiles. Finally, it might seem to be a type of insurance that may have cheaper car insurance premiums. UBI has been in vogue in US and Europe for the past several years. Now, UBI finally arrived in the Canadian insurance scene in 2013. The timing could not be better as exorbitant insurance premiums had become the norm for the motorists in Ontario.

Usage-based insurance is based on your driving patterns and usage trends. These habits affect the auto premium rates that you end up paying. So you may not pay insurance premiums based on the assumed mileage as per your insurance company. You may rather pay for the actual mileage driven and the driving habits you display while on the road. So, if you are a safe and careful driver, you may enjoy lower premium rates.

Benefits of Usage-Based Insurance

road behavior

  •  The real-time monitoring done by insurance companies does foster responsible road behavior.
  •  The feedback was given by insurers to the drivers enhances their driving skills and fills in voids for better road safety.
  •  Drivers save a lot on insurance premiums by adhering to road safety at all times.
  •  The telematics program has reduced the number of motor vehicle accidents each year.
  •  The road traffic is much less congested due to fewer vehicles on the road.
  •  Parking costs are also saved for motorists who prefer not to use their car much.
  •  Pollution has been reduced thus promoting clean air for pedestrians.
  •  There are more avenues of land that could be utilized better by city planners.
  •  In short,  UBI fosters road safety and could save many lives as well.

What is Telematics Insurance

Usage-based insurance is also known as telematics insurance as there is a telematics device fitted to the car insured by the policy. It is a tiny wireless device that fits snug into the diagnostic port of the car such as under the steering wheel. This device monitors many driving factors that are reported to the insurance company. Based on the road habits and safety as a driver, the insurance premiums may also reduce. All data collected by the telematics device is strictly private and intended for the purpose of only insurance calculation as per FSCO regulation.

What Data Is Used by Usage-Based Insurance


The main metrics on which the telematics device measures a driver’s performance are varied. Each insurance company may have a different set of parameters to look at. Some insurers also record the location, route, and frequency of driving including the timing.

Four main metrics are basically used by most insurance companies:

  • Braking

    – The number and the tendency to break the vehicle are crucial for telematics. The braking pattern you follow including any abrupt or hard brakes etc. is all recorded. When this data is transmitted to your insurance company they could understand the safety score in your braking while driving.

  • Speeding

    – Just like braking, it is also necessary to check when and how you are allowed to speed within safe limits. The GPS in the telematics device records any sudden speeding or risk over speeding by a driver. It compares your speed with the posted speed limits. This data is checked by insurance companies to know your driving patterns. Staying close to or below the posted speed limits would benefit the driver.

  • Cornering

    – The angle at which a driver turns his vehicle may determine the safety of the car, any crossing pedestrians, bikers, etc. If there is unsafe cornering, that could be recorded by the telematics device. Any corner turns with overspeeding may prove hazardous to road safety. Your insurer may not prefer such a risky driving pattern.

  • Driving location and frequency

    – How often and where you drive is also recorded by the GPS in the telematics device. You may not be able to falsify such details. These two factors are considered big when assessing your risk score for claims.

The insurance company collects the above data with the telematics device. After analysis, they decide on how to calculate your insurance premiums to reflect your driving habits. Based on their decision the driver may get a telematics discount.

Who Can Benefit From Usage-Based Insurance

Any safe motorist in Ontario may have an advantage by choosing UBI. The insurance companies reward safe drivers in the form of reduced premiums. UBI is to boost road safety and could be most beneficial to the age group under 24 years. The reason is, that the age group does pay higher premiums due to lack of driving experience. So by adopting telematics, these drivers may improve their driving skills with monitoring.

The potential reduction in car insurance premiums by about 10% to 25% does motivate a driver to be careful. Another group consisted of those drivers who drive less than or equal to 10,000 km per year. This group may reduce their premiums by choosing to drive sparingly and safely.

Will Using Telematics Device Increase Car Insurance Premiums


Telematics can be used to monitor driving habits but, it does not allow insurers to penalize you for being an unsafe driver. At the most, you may not avail of the discount. In Ontario, insurance companies are not allowed to cancel the policy, increase rates or deny a claim based on telematics. It is only intended to know your driving habits and reduce premiums if you adhere to the road safety standards.
The telematics device does help to form a driver profile that the insurance companies may base your driving skills on. Another aspect is that all listed drivers on the policy may be affected by the telematics data. As per FSCO, though the listed unsafe driver/s may not be disclosed, it may affect the calculation of the car insurance premiums.