Usage-based insurance (UBI) has become a popular alternative to traditional auto insurance. UBI uses technology to track and analyze your personal driving habits. This personalized approach means insurance companies can offer pricing that reflects how you drive.

Curious about how it all works? We’ll dive into how usage-based insurance tracks your driving to determine how much you pay.

Understanding usage-based insurance

Insurance has always been data focused. But now, some forward-thinking insurers are using personalized data collection for a truly customer-centric purpose. Factors like your age, location and driving record typically determine how much you pay for car insurance. And we agree that these things are important, but they don’t really paint a picture of how you drive day to day. Enter – usage-based insurance. These programs monitor your real-time driving habits and determine whether you’re a safe driver or not. If you’re a safe driver, you’ll be rewarded with a discount on your premium. In a nutshell, UBI gives drivers more control over what they pay for auto insurance.

UBI devices and apps monitor and collect data on habits like how fast you go, how often you drive and how smoothly you brake. The data is analyzed, and the driver is given a score. Then, depending on who you're insured with, your premium is adjusted either at renewal or at set intervals during the policy term to reflect your driving score.

So, the better you drive, the more likely you are to get a discount. Sounds great, right? It is – but some very unsafe drivers might find themselves paying even more, due to surcharges. Yikes!

Did you know? At Sonnet, our usage-based insurance program, Sonnet Shift, adjusts your premium every three months instead of yearly. This gives you more chances to improve your driving and save even more money!

Telematics technology and data collection

Still have questions about how these programs work? No problem – let’s talk tech! UBI relies on personal data collection using telematics technology to track how you drive. This might sound complicated, but it’s not – we promise!

Telematics uses sensors to track and transmit data about driving behaviour. For example, big commercial vehicle companies use telematics to keep an eye on their vehicles and learn how employees are driving.

Back in the day, UBI used a telematics device that was installed directly into the car to collect driving info. These still exist, but UBI smartphone apps are more the norm now – and for good reason! Our smartphones are powerful little devices that have many useful sensors built in.

When you download a UBI app, you give it access to use sensors in your phone like the GPS, clock, accelerometer, gyroscope and more. You’ve likely already seen some of these sensors at work, like when using your map app to get real-time directions.

UBI apps use these sensors specifically to determine the time and length of your trips. The accelerometer shows how fast your phone is moving, to measure your driving speed. The GPS shows which routes you're taking. And, your phone’s gyroscope detects the direction you’re going in. The app could even use additional data to see if the roads you take have a high number of intersections or lanes, heavy traffic or pedestrian density, poor street lighting and a high frequency of accidents (which can make them more dangerous). The data collected is securely stored and analyzed in the app, and will determine the driving score you receive.

When you hop in your car and start to drive, the app tells all the sensors to get to work! Pretty neat.

Here are other aspects of your driving behaviour a UBI app can track to determine your score:

• Smooth Driving – This measures how smoothly you speed up and slow down on the road. It can show if you’re more likely to be involved in a crash (and as a result, have an insurance claim). Smooth driving and gentle braking mean a better score for you.
• Mobile Use – This measures your attentiveness while driving. Using your phone while your vehicle is moving will bring down your score. This could include using GPS, unlocking your phone, selecting music, or taking a hands-free phone call.
• Speed – This measures if you’re keeping a consistent, safe speed throughout your trip. Cruise control and watching out for that speedometer can help you avoid going too fast. This way, you could earn a better discount.
• Fatigue – This measures the length of your drives. Your score will improve with shorter trips and regular breaks. Regularly driving long distances without breaks will reduce your score.
• Time of Day – This measures when you’re usually driving. The best time to drive and to improve your score is when there's minimal traffic, and during the daytime. You want to try and avoid driving during rush hour and at night since it could reduce your score.

Tracking driving behaviour

As cool as this all sounds, you may be wondering – how do UBI apps know who is driving the car?

UBI apps run in the background and automatically record each trip after it’s installed and set up. Each driver will need to have the UBI app installed on their personal phone – it’s assumed you’re driving when your phone is in the car. If you’re just a passenger in your car, or if you hop in an Uber or take a bus, generally apps will allow you to select that you’re a passenger, so you won’t be scored for someone else’s driving.

Before starting UBI, it’s a good idea for you and anyone else who signed up and lives in your household to learn tips for becoming a defensive driver. It'll help everyone start saving money the moment you jump in the car!

Heads up! Not every company’s app will recognize when you're taking a different form of transportation, like a train, or if you're riding your bike. Make sure you understand what to do with the app to make sure these aren't tracked as car trips.

Benefits of usage-based insurance

We've already told you about the number one benefit of usage-based insurance: an insurance discount for driving well. Drivers who adopt good driving habits could see pretty big savings once they start with UBI! And, UBI has another major perk – it can actually help you become a better driver since many UBI apps will give insight into where you could improve. Being aware of your day-to-day driving habits will help make you a safer driver overall, alongside saving you money.

But, not everyone will have the same experience with UBI.

Can drivers with usage-based insurance be penalized for bad driving?

It’s important to keep in mind that just as good driving habits can decrease your premium, bad driving habits can increase it. Before enrolling in a UBI program you should make sure you completely understand what the app is tracking and how that influences your insurance premium.

If you’re not getting the discounts you hoped for, check out your past trips and consider what you could be doing to drive up your rate so you can adjust your behaviour accordingly.

Privacy and data security considerations

Concerned about data privacy? That's totally understandable. In this day and age, you should be extra vigilant when it comes to the security of your information! Insurance providers must follow all applicable privacy laws and regulations within each province that protect customers from unauthorized usage of their information – this includes UBI. Knowing this, you can rest assured that any details that are tracked or recorded will remain secure. Keep in mind it’s also up to you to know exactly what you’re signing up for.

Conclusion

UBI is an exciting new offering in the world of insurance. As the customer, it puts you first by giving you more control over how much you pay for your car insurance. Sure, using an app to command your insurance may take a bit of getting used to, but when you see that premium take a nosedive your wallet will thank you!

Have questions about Sonnet Shift? Get in touch with us – we're here to help!