Drivers are more aware of usage-based insurance, but take-up remains sluggish

More car drivers in Ontario are aware of usage-based insurance (UBI) options, but consumers continue to be wary of using them, says a new study from Rates.ca.

“It may be an image problem – as a digital offering that requires some set up, some may consider it an inconvenience,” says Rates.ca CEO Igal Mayer.

“But according to the study, across all age groups, 96% of respondents who have UBI policies found it easy to set up, 71% agreed that it reflects their driving habits, and 88% said they would likely continue with a UBI policy when they renew.”

In Canada, several auto insurance companies offer a variety of telematics programs (of which UBI is a subset). Drivers using telematics agree to use a phone app, or plug a device into their vehicle port, allowing data from GPS and onboard diagnostics to collect data on their location, driving behaviors (speeding, braking), fuel use, and engine health.

Auto insurers offering telematics programs include Desjardins (Ajusto), CAA Insurance (MyPace), Intact (MyDrive), belairdirect (Automerit), Aviva Canada (Aviva Journey), Gore Mutual (Drive Good), and Allstate (Drivewise), among others.

As more auto insurers offer UBI options, Ontarians’ awareness of the programs is growing, the Rates,ca study shows. Two-thirds (66%) of the 14,675 drivers surveyed online say they’re at least somewhat familiar with UBI, a five-point jump from last year. The Ontario customers most likely to be familiar with UBI are between 30 and 39 years old, women, and those who live in Toronto.

However, despite the increased public awareness, UBI remains a niche product because of low take-up rates. Of all customers surveyed by Rates.ca, only 16% have a UBI policy. Among those who don’t, one in four (25%) would consider switching to receive a minimum 5% discount.

Apart from the perception of inconvenience noted by Mayer, another obstacle may be convincing drivers UBI options aren’t ‘Big Brother’s’ way of monitoring — and penalizing — their driving habits.

“To get UBI into the hands of drivers who stand to benefit most, insurers are focusing on education, engagement, and reframing UBI as a tool for empowerment — not surveillance,” as the Rates.ca report states.

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Why UBI?

Some insurance professionals emphasize the auto insurance discounts available for good drivers. But discounts are only the starting point, as some insurers in the Rates.ca study point out. Getting drivers to become engaged with the programs on a regular basis is key.

For example, Gore Mutual Insurance has added a gamified element to keep customers interested in using its ‘Drive Good’ telematics program. Drivers can earn weekly rewards for exhibiting safe driving habits, redeemable for gift cards.

“Customers also receive a 10% discount upfront and can earn up to 20% at renewal, transforming insurance into an interactive experience that motivates safer behavior and reinforces long-term value,” says Chris Van Kooten, chief underwriting officer of Gore Mutual Insurance Company, as cited in the study.

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Meanwhile, CAA Insurance is highlighting how telematics can personalize auto insurance. For example, its MyPace app benefits drivers who drive infrequently, meaning they don’t pay high rates for auto insurance they’re not using.

“One size does not fit all when it comes to auto insurance,” says Elliott Silverstein, director of government relations with CAA Insurance, per the Rates.ca study. “We recognize that low-mileage drivers want to pay only for the coverage they actually need.”

The MyPace program “allows low-mileage drivers to pay a base rate and then monitor their usage, paying only for the insurance based on the kilometers they drive,” he says. So, for example, if someone drives only 6,000 kilometres in a year, it’s possible to save up to 25% with CAA MyPace’s payment program.

The key to higher UBI usage is public education, auto insurers say. And this means auto insurers need to work with their brokers to help promote the consumer benefits of UBI.

David Gambrill

David has twice served as Canadian Underwriter’s senior editor, both from 2005 to 2012, and again from 2017 to the present.