In the U.S., there has been a slow but steady adoption in recent years of so-called “usage-based” auto insurance that involves vehicles being tracked electronically. In theory, this allows consumers who are relatively safe drivers – those who don’t speed, avoid stopping short, and generally drive more defensively – to reduce their auto insurance costs each month by giving their insurers direct insight into their habits. But while this is catching on with Americans, Canadians seem a lot less sure of it.
Today, only about 2 in 5 Canadians say that they see a lot of potential benefit in enrolling in a usage-based insurance program, according to a new survey from Leger. Many don’t think that they would actually receive discounted rates if insurers carefully tracked their driving habits, and a little more than 1 in every 3 felt as though there just wasn’t much of an advantage in it for them.
What people understand, and what they don’t
However, much of this trepidation may simply come from a lack of understanding about how usage-based insurance works, the report said. In all, 26 percent of respondents each felt that their rates could decrease or increase with such a plan, and close to 1 in 3 felt there would be no change at all. This comes despite the fact that insurers say clients can’t see their rates rise as a result of enrollment in usage-based coverage, only drop.
“There is a clear gap in understanding here as the purpose of a UBI program is to create a personalized insurance premium,” said Ryan Michael, senior vice-president and chief risk officer at a major Canadian auto insurer. “The fact is, enrollment in a UBI program won’t result in a rate increase.”
However, it wasn’t just price people were worried about, the report said. In addition, many also expressed concerns that allowing their insurers to track their driving habits would constitute a significant invasion of privacy; nearly half did not trust their insurers to keep such data private or to not share it with outside parties. Another 65 percent were worried that such a device being installed in their cars would end up tracking their movements and locations. However, in the latter cases, it seems that location tracking is being done by some insurers but not others, so consumers worried about it may need to consult with their policy provider or agent to determine where they would stand.
As with any other options related to insurance, consumers should always carefully review each potential choice to ensure they’re making the best possible decisions based on their unique needs. That doesn’t just apply to auto coverage, but also home or business insurance should there be major damage in the future. That kind of weight should be given not only to financial considerations, but also those for the specific types of coverage that would work best going forward.