What Are Driving Apps and Telematics And How Can They Affect Your Car Insurance?

If you could pay less for your car insurance by installing a small device in your car, would you? Would you consider installing a driving app on your mobile phone if it could help to lower your auto insurance costs? The devices and apps send data about how much you're driving and how you're driving to your auto insurance company. They're called telematics or usage-based insurance (UBI).

Each year, more Canadian car insurance companies offer UBI or telematics to customers.

How does usage-based insurance (UBI) or telematics work?

Telematics devices are small electronic devices that plug into a car's diagnostic port. They often come branded with the insurance company's logo. The device sends data to the insurance company on your driving speed, braking, fuel economy, and how many miles you drive.

As an alternative, some insurers have come up with a driving app for your mobile phone. The app senses your driving and sends data to the insurance company. Obviously if you forget your phone one day, the company won't receive your driving information. Plug-in telematics devices send data 24-seven, including about your car's location.

Insurance companies use the data they receive about your driving habits and mileage to determine your premium. Some companies provide "pay by mile" policies, while others provide "safe driving" premiums for drivers who don't speed, brake harshly, or engage in other risky driving behaviors.

Do telematics violate driver privacy?

One Nova Scotia driver thought his insurance company was invading his privacy with a recommended telematics device and refused to install it. The company offered him the device to reduce his premium, but he preferred to maintain his privacy.

Privacy concerns seem to be outweighed by the benefits of usage-based insurance devices for most Canadians. Shortly after UBI devices entered use in Canada, the Insurance Bureau of Canada conducted a survey in Ontario. The survey found that most people polled agreed with the use of telematics. UBI devices were most popular with people who drove under 10,000 kilometers a year.

What benefits do telematics devices have?

Telematics can lower insurance premiums because they confirm safe driving habits and lower risks. A 2019 study from the Journal of Marketing Science found that telematics/UBI users improved their driving habits after using the device.

Changes in driver habits increased with telematics use. For example, the study learned that on average, UBI users reduced their hard braking by 21 percent after they had used the device in their car for six months.

Victoria Transport Policy conducted another survey of telematics users in B.C. and concluded that increased use of telematics could reduce traffic congestion, pollution, and energy use.

You may be interested in saving money on your car insurance, driving safely, and better fuel economy. Telematics users have accomplished all three of these goals. Investigate your options for telematics devices and compare car insurance quotes today.