Increasingly, insurance companies in Canada are offering telematics insurance, also known as usage-based insurance or pay-as-you-drive insurance. This is an attractive option for people who don’t drive often and have safe driving habits. Here’s what you need to know about this kind of car insurance.
What is telematics?
When you sign up for a telematics program, your car is outfitted with a telematics device. This tool monitors your driving. In particular, it collects information on the key risk factors associated with driving. These include the distance you drive, the speed you drive at, the time of day you’re on the road and the way you accelerate and brake. The insurer calculates your insurance rates based on this information and what it reveals about your risk of being in a car crash.
Telematics devices generally connect to a vehicle’s OBD-II port. However, expect to see this technology integrated with smartphones in time. Some insurance providers in the U.S. have already gone this route.
Benefits of telematics
Telematics can be a cost-effective insurance option for some drivers. If you don’t drive very often or only make short trips, you can expect to see a reduction in your rates. You’ll also be rewarded if you’re an exemplary driver, in particular if you don’t speed, don’t accelerate abruptly and don’t brake suddenly.
Moreover, it’s argued that the incentive of getting an insurance discount encourages safer driving practices. It may even influence people to drive less often, and instead to walk or bike, thereby encouraging fitness.
While the use of telematics rewards good driving, it also punishes poor driving, or more precisely, what the technology interprets as such. So, if you’re cut off by another car and have to suddenly brake, the device won’t be able interpret this. It will only register that you braked suddenly.
Moreover, if you aren’t an inexperienced driver, a high-risk driver or if you drive often, telematics probably isn’t a good option for you.
The data collection involved in telematics has led to privacy concerns among some drivers. However, it should be noted that the data insurers collect is subject to strict privacy laws.
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