The price you pay for car insurance isn’t a one-size-fits-all approach. Many details, such as your age and where you live, account for your total premium. But there’s a newer model of insurance that could help you save more money based on how well you drive. Enter usage-based insurance.  

Every auto insurer is different, so it’s best to contact your provider for specific information on usage-based auto insurance if it’s something they offer. They can provide you with expert advice on any questions you may have.

What is usage-based insurance? 

Usage-based insurance (UBI), also known as pay-as-you-drive, is a type of auto insurance that uses technology to track and analyze your personal driving habits. Instead of relying only on traditional factors like your age, location and driving record, this personalized approach allows insurance companies to offer pricing that more accurately reflects how you drive from day to day. 

If you’re a safe driver, you can be rewarded with a discount on your premium. In a nutshell, usage-based insurance gives drivers more control over what they pay for auto insurance. 

How does usage-based insurance work in Canada? 

So, how usage-based insurance works is by relying on telematics technology to keep track of your driving habits. Telematics might sound complicated, but it’s not! Through an app, it uses your phone’s GPS, clock and accelerometer to track and transmit data about your driving behavior. 

Once the app is set up, you just get in your car and drive. The data collected is securely stored and analyzed in the app, which then determines your driving score.

What aspects of driving behavior can UBI apps track? 

UBI apps use your phone’s built-in technology to measure various driving behaviours to determine your score. While each insurance company might vary the type of data collected, here are the common metrics that are recorded: 

• Smooth driving: this measures how smoothly you speed up and slow down. Sudden braking and hard acceleration can indicate a higher likelihood of a crash, while smooth driving and gentle braking lead to a better score.
• Mobile use: this measures your attentiveness. Using your phone while your vehicle is moving (even for GPS or hands-free calls) can slow your reaction time and will bring down your score. 
• Speed: this tracks if you’re keeping a consistent, safe speed. Following the speed limit and using cruise control can help you earn a better discount. 
• Fatigue: this measures the length of your drives. Your score will improve with shorter trips and regular breaks, while regularly driving long distances without stopping will reduce it. 
• Time of day: this measures when you’re driving. To improve your score, it’s best to drive during the daytime and when there's minimal traffic, as driving during rush hour or late at night is considered riskier and could reduce your score. 

Can usage-based insurance lower car insurance premiums? 

Yes, it can. To start, some insurers will give you between 5-10% off just for joining a usage-based car insurance program. As the insurer learns more about your driving habits, this initial discount is replaced by a savings or surcharge based on your driving score. 

While traditional factors (age, location, vehicle type) are still considered, your driving habits become a key factor in determining your total premium. If you follow the rules of the road, you could save a lot on your auto insurance. For example, with Sonnet, you could save up to 35%! 

On the flip side, riskier drivers could see their premium increase. Typically, your insurer will review your driving behaviour at specific times of the year and adjust your premium, so there’s always room for improvement. 

What are the pros of usage-based insurance? 

There are many benefits to using usage-based auto insurance programs, making them an attractive option for many drivers. 

Savings on auto premiums 

You can save just by joining a program. Eventually, that enrollment discount is replaced by a safe driving discount based on your behaviour. The safer you drive, the more you’re likely to save. 

Encourages safer driving 

Another great thing about usage-based insurance is that it encourages users to be better drivers. The UBI app provides direct feedback on your habits, helping both new and experienced drivers get tips on how to improve and become safer on the road. 

Helps with accident investigations 

Only some providers will use telematic data to help with a claim, so it’s important to read the fine print. When they do, the data can provide details like your exact location or if speed was a factor, which helps claims adjusters determine what happened and who was at fault. 

It's simple to get a quote and purchase 

You can get a quote and purchase usage-based car insurance in just a few minutes, often entirely online. Once you’ve signed up, you just download the app or install the plug-in device. After that, you can start tracking your driving and earning savings. 

What are the cons of usage-based insurance? 

While the benefits are clear, there are several potential cons of how usage-based insurance works that are important to consider before signing up. 

Surcharges for risky driving 

The flip side of a safe driving discount is that riskier habits can lead to you paying more for car insurance. If you often speed, brake suddenly or drive late at night, you might not receive a discount and could even see your premium increase.

Concerns about data privacy 

It's understandable to be concerned about data privacy. However, insurers must follow all privacy legislation set by regulators, which protects your information from unauthorized usage. Rest assured that any details tracked will remain secure. As with anything, it’s important to understand what you’re signing up for and how your info will be used. 

Questions about accuracy 

Critics sometimes question if tracking apps can accurately tell who is driving. Since your phone can’t know if you’re behind the wheel or just a passenger, most apps require you to confirm if you were the driver. Some apps will give you a 48-72 hour window to tag your trips as a driver, passenger or on public transit to keep your tracking accurate. 

Can I get a driver discount without participating in a usage-based insurance program? 

If you decide car insurance based on usage isn’t for you, there are still other ways to save: 

• Claims-free: the longer you go without a claim, the higher your potential discount could be on insurance costs. Generally, savings could increase for each year of safe driving. 
• Multi-vehicle: insuring more than one car under the same policy could qualify you for savings
• Multi-policy: bundling your home and auto insurance together could help you save on both
• Winter tires (Ontario only): they keep you safe and can help you save on your auto insurance 

Is usage-based insurance available across Canada?

Usage-based insurance in Canada is not yet available in all provinces and territories, but adoption is growing. Check with your local insurance provider to see if it's an option for you.

Who should choose usage-based car insurance? 

Usage-based car insurance is a great fit for people who are confident in their safe driving habits. You might benefit the most if you:

• Consistently follow the speed limit and practice smooth acceleration and braking.
• Are a low-mileage driver who doesn’t spend a lot of time on the road. 
• Typically drive during daylight hours and avoid late-night trips or congested rush-hour traffic.
• Are a new driver with a clean record who wants to be rewarded for safe habits. 

If you are considering usage-based car insurance, here are a few questions to ask your insurer before signing up: 

• What specific driving habits do you track and score?
• Can my premium increase for risky driving? If so, by how much? 
• How do I indicate when I am a passenger and not the driver? 
• What happens to my data, and how is it protected? 

Start saving with Sonnet’s usage-based insurance program 

Usage-based insurance is an exciting offer that puts you in control of how much you pay. Sonnet Shift is an example of a usage-based insurance program that rewards your safe driving with real savings. By using a simple smartphone app, we give you personalized feedback to help you become an even better driver. The safer you drive, the more you can save on your car insurance. 

Ready to see how your driving habits can lower your premium? Get a quote with Sonnet today and find out if our usage-based auto insurance program is right for you.