Pay As You Go Auto Insurance: Everything You Need To Know

Telematics insurance in Canada, better known as usage-based car insurance (UBI) and pay-as-you-go car insurance, is not a particularly new offering for Canadian motorists. First seen in 2013, it’s based on a simple premise – pay lower premiums if you drive less and drive safely.

Though pay-as-you-go auto insurance has been around for almost 10 years, its uptake had been relatively low – until COVID-19. With cars parked in driveways for days, if not weeks, it’s no surprise people are trying to find ways to cut their insurance costs. No wonder the CAA says pay-as-you-go insurance has grown 300% in 2020 alone.

It may sound like an easy way to save money, but do you know the pros and cons of opting for pay-as-you-go insurance? 

What Is Pay-As-You-Drive Insurance in Ontario?

Telematics insurance in Canada offers consumers lower premiums for safer driving and less driving. It’s why it’s also called ‘low-mileage car insurance’ in Ontario, since it can lower insurance premiums if you drive infrequently or make short trips.

How Does Pay-As-You-Go Car Insurance Work?

Unlike traditional auto insurance, pay-as-you-go car insurance uses vehicle tracking to monitor driving behaviour. The setup consists of a module that connects to the vehicle’s onboard diagnostics port (OBDII) to collect data and (possibly) the driver’s smartphone to transmit the data. 

The device is able to capture a wide range of information about driving behaviour, including:

• Location
• Speed
• Distance driven
• Acceleration
• Braking
• Steering input
• Vehicle faults
• And more

By monitoring these aspects, the insurance company can reward safe driving by lowering insurance premiums. Until recently, drivers could not be penalized for unsatisfactory driving, untill Ontario changed its laws (we’ll discuss that below).

Pay-as-you-go auto insurance has been growing in popularity over the last few years. Some industry estimates say drivers opting for telematics insurance in Canada have risen 25-40% every year on average. 

Before you rush to sign the dotted line, find out what are some potential advantages and disadvantages of pay-as-you-go car insurance.

Pay-As-You-Go Auto Insurance: Pros

Safer driving: This is easily the biggest benefit of usage-based car insurance in Ontario. It can encourage you to accelerate and brake more smoothly, and discourage bad driving habits such as speeding, running stop signs, and weaving in traffic. 

Lower premiums: Avoid maneuvers that the insurance company deems unsafe and you could save as much as 30% on what you would have paid for standard auto insurance.

Faster claim resolution: Involved in a collision? Claims adjusters have access to a wealth of information that can help resolve claims faster and potentially more accurately (though any experienced car accident lawyer will tell you that’s not always the case).

Pay-As-You-Go Auto Insurance: Cons

Privacy concerns: Telematics systems collect an unprecedented amount of data about your driving, including your GPS location. Not surprising then that not everyone is comfortable with such a detailed record of their driving style. Some insurers also require smartphone apps that track you even when you aren’t in the car.

Data sharing: The Personal Information Protection and Electronic Documents Act (PIPEDA) grants some protections to consumers, but ultimately you will have to consent to letting the insurance company disclose and share data with third-parties. What the effect of that is on credit scores, vehicle-related charges, and personalized advertising is a complete unknown right now.

Penalty surcharges: Previously, Ontario did not permit insurance companies offering telematics to penalize drivers for not meeting their driving standards. However, since November 2020, the Financial Services Regulatory Authority of Ontario has permitted insurers to charge more for risky driving and high mileage.

Potential Impact of Pay-As-You-Go Car Insurance on Personal Injury Claims

Read the fine print and you’ll see that the insurance company doesn’t just own the device, it owns the data too. In the event of a collision or a personal injury claim, that can give the insurer’s lawyers an advantage during settlement and trial. 

Car accident lawyers representing drivers may need to engage experts to interpret the data. Moreover, since the insurance company has access to the information long before your car accident lawyers do, they can gain the upper hand in legal strategy.

Another worry is that telematics systems have not been shown to be completely accurate. Readings about an accident (G-force readings, braking events, etc.) can be inaccurate or misrepresent it. In such cases, fault can be attributed incorrectly, especially when findings are based primarily on the basis of the data collected.

What to Do If You Are Involved in a Car Accident?

Whether you’ve gone with traditional auto insurance or telematics – drive safe! Safer driving will help you lower your premiums and reduce the risk of collisions regardless of the type of insurance you choose.

If you or a loved one are involved in a serious car accident, talk to our trauma lawyers immediately.

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