Usage-based insurance gaining popularity as traditional premiums rise

Demand spiked by almost 20%

Usage-based insurance gaining popularity as traditional premiums rise

Motor & Fleet

By Mika Pangilinan

Demand for usage-based auto insurance (UBI) in Canada has increased by almost 20% as premiums continue to rise, according to new data from RATESDOTCA.

The comparison website recently reported that quotes for UBI have risen since September 2022, only slightly slowing in the last month.

In January, RATESDOTCA saw UBI quotes shoot up 18.22% compared to the same period last year, with a 54.64% month-on-month increase in drivers opting for a UBI discount.

What is usage-based auto insurance?

Telematics is a technology that monitors a driver's behaviour and helps to accurately measure driving risk and vehicle usage. UBI programs leverage this data to determine the driver's risk profile and to calculate a more accurate premium.

“Policyholders have the choice to opt for telematics-based insurance programs,” said Brian Halk, vice president of global marketing at Insurance & Mobility Solutions (IMS), as cited by RATESDOTCA. “And exchange their driving data for more accurate insurance premium pricing.”

Insurance companies that offer UBI in Canada include Onlia Insurance, CAA Insurance, Desjardins, and Pembridge.

While UBI has been available to Canadian drivers for nearly a decade, the continuous rise of traditional insurance premiums has made it a more attractive option, according to RATESDOTCA.

The report specifically cited how auto insurance rates in Ontario are expected to increase by 7 or 8% by the second quarter of this year as several providers were approved for rate changes in late 2022.

UBI demographic breakdown

The popularity of UBI was found to be the highest among younger drivers, with nearly 55% of drivers between the ages of 20 to 29 opting for a UBI discount. On the other hand, only 30% of drivers aged 60 and older have chosen UBI.

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

Quotes from male drivers in the age group of 20 to 29 were also revealed to have gone up by 75% in January and 68% in February, as compared to their female counterparts with 65% interested in UBI in January and 57% in February.

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