Why Canadian drivers are increasingly turning to UBI

Canadian drivers are increasingly turning to usage-based insurance (UBI), particularly since the beginning of 2023, new data from rate aggregator RatesDotCa found.

Quotes for UBI from the rate comparison site were up 18.22% year-over-year, RatesDotCa said Mar. 31. The data showed quotes for UBI have been rising since September 2022; quotes for UBI increased 54.64% month-over-month in January, and 36.80% month-over-month in February.

RatesDotCa attributed the increase to rising auto insurance premiums.

In Ontario, premiums have been steadily increasing since 2022. The rate aggregator predicted another 7% to 8% increase in 2023 Q3, with several insurers being approved for rate changes late last year as one reason for the increase. Some drivers may have already seen the effects, while others are likely to see a higher premium upon policy renewal.

In Alberta, despite the recently announced rate freeze, drivers in the province will still see an increase if their insurer was previously approved for a rate increase, RateseDotCa added.

“With auto insurance premiums steadily on the rise and inflation impacting consumers across the board, Canadians are beginning to open up to creative cost-saving measures,” said Daniel Ivans, RatesDotCa insurance expert. “UBI can be a very powerful tool for responsible drivers, but knowing what kind of UBI policy works best for a driver’s personal situation is important in order to make the most of the savings available.”

Some UBI offers pay-as-you go policies, which tie premiums directly to the amount the vehicle is used, RatesDotCa explained. Other UBI policies are pay-how-you-drive, which use onboard tracking technology or an app to monitor driving habits and assess the level of risk posed by the driver.

Telematics data can measure things such as speed, trip distance and time, location, harsh braking and cornering, and distracted driving. Safe drivers can see discounts on their average yearly premium by using telematics devices.

Although use of telematics in the auto industry has been around for about a decade, “there seems to be a growing interest, with more Canadian drivers now opting for it,” RatesDotCa said.

UBI was more popular with a young demographic, with nearly 55% of drivers aged 20 to 29 opting for a UBI discount (compared to 40% aged 30-39 and 30% of drivers aged 60 and older in January). As well, UBI quote interest from male drivers in the 20-29 age group went up 75% in January and 68% in February, compared to their female counterparts, with 65% interested in UBI in January and 57% in February.

“Perhaps, a young demographic is much more comfortable with using smart technology-based systems. Or possibly, amid privacy concerns of sharing telematics data with insurance companies, UBI hasn’t found favour with an older demographic.”

Feature image by iStock.com/oatawa