All you need to know about telematics car insurance

Let’s talk telematics.

No bullshit.

Telematics car insurance is a system that tracks how you drive to determine your cost of insurance.

You might assume, given that this blog post is coming from an insurance broker, that we’re in favor of it.

That we’re here to pump its tires since it’s in our best interest for as many people to get on board as possible. 

That’s not what we’re here for. 

Telematics has its pros and cons, but we’re not taking a side.

And we’re definitely not trying to sell you on it.

We just want to give you all the facts so you can make your own informed decision.

First things first: telematics is not a gimmick.

It’s also not the second coming of our lord and savior.

The truth lies somewhere in the middle.

With car insurance telematics, it boils down to this: Better drivers will get discounts.

Reckless drivers will pay more.

Without further ado, here’s what we’ll cover in today’s blog:

• A deeper explanation of car insurance telematics
• Intact my Drive program & app review
• A broker’s opinion on telematics auto insurance

Here’s what we won’t cover:

• Bullshit

Okay, let’s break it down.

Car insurance telematics explained

Telematics is a type of usage-based insurance.

Insurance companies offer telematics programs on a voluntary, opt-in basis. 

When you belong to the program, an application monitors your driving behaviors, which allows your insurance to be customized according to your driving patterns.

Insurance providers tend to market their programs with a promise of lower automobile insurance payments.

We’ll get to that later.

What telematics aims to get away from is demographics-based insurance.

Typically, they’d provide rates based on things like age, gender, and location.

Well that’s not totally fair, is it?

Males in their twenties, for example, tend to pay some of the highest insurance rates.

And that’s because the data shows they’re the most likely to drive dangerously.

But what about those males in their twenties that are outliers?

The ones that follow all the rules of the road but are still paying through the nose.

How is that fair to them?

It’s not.

(And on the flip side, what about all those elderly women that are ripping around cutting people off and flipping the bird to the old lady driver stereotype?!)

To get away from that sort of insurance inequality, companies started to innovate — and to use the technology that was available.

The telematics craze in Canada began roughly eight years ago.

Back then, car insurance companies would provide you with an actual remote device that you’d plug in or attach to your steering wheel.

2013 — am I right!?

Now, we do it the same way we do everything else: through a smartphone app.

You download the app to your phone, and as long as your phone is with you in the car, data is collected from every trip without any additional prompting.

Here, we’ll meme-ify the evolution of telematics so you can understand it better.

How it started :

How it’s going :

In the “old days”, your car insurance company knew the distance you drove in a year — and that was about it.

With today’s technology, they’re tracking a whole lot more.

Here’s what the application tracks:

• Acceleration rate
• Braking habits
• Driving speed (in relation to the speed limit)
• Time of day (you’re penalized for driving between 12 am – 4 am)
• Distracted driving

Yes, the app knows whether you text or talk on the phone while driving, and both those acts are penalized, even if you’re using a hands-free system.

Using a GPS or Bluetooth-connected music app is not penalized.

Rumour has it that one day, telematics apps will penalize drivers for taking the road in adverse weather conditions.

It’s not hard for them to connect to weather apps, so if you drove during a snowstorm or rainstorm, they’d dock you.

But we can’t officially confirm nor deny that.

We can only write knowledgeably about the Intact my Drive program, since it’s the only usage-based insurance app we use at KBD.

Desjardins’ Ajusto, CAA’s MyPace, and AllState’s Drivewise are three other examples.

Still, we can tell you there isn’t a whole lot of difference from one company’s program to the next.

There are probably slight differences in how each one operates, but they all collect more or less the same data.

Intact my Driving Discount Review

Since we work a lot with Intact Insurance, and theirs is the only program we actively work with, it’s the only one we could fairly review.

And that’s what we’ll do.

Intact gives an automatic, one-time 10% discount just for signing up to my Drive.

Every six months, they’ll adjust that discount based on performance.

Once you sign up for the app, you’ll be on it permanently throughout the duration of your relationship with Intact.

With their my Driving Discount smartphone app, you have 24/7 access to your driving stats, updated in real time.

From that data, they provide you personalized tips for “optimizing your driving” in a way that’ll lower your insurance rates, as well as show you how you compare to other drivers using the app.

Finally, they’ll provide you a Safety Score based on your speed, smoothness, and focus.

As a recap, they’ll email you a report card summarizing your performance and your progress toward a discount every seven to 10 days 

You might be thinking: that sounds great, but can my car insurance go UP if I use the Intact my Driving Discount application?

Of course it can.

 

Adjustments to your premium are made every six months, and a poor score will result in a rate increase.

You’ll be warned in advance if and by how much it’ll go up or down.

Given that all this information is available to you in real time, there should be no surprises when your bill comes.

By driving safely and keeping a good score, you can lower your rate by up to 25%.

But your score must dictate at least a 5% rate increase or decrease in order to actually affect a price change.

In the spirit of fairness, we should tell you that the my Driving Discount app doesn’t appear to rate favourably in the eyes of its users.

On Apple’s App Store, it scores a 1.4 star (out of 5) review.

A broker’s opinion on telematics auto insurance

Since you didn’t ask for our opinion, we’re going to give it to you.

In a usage-based system like my Drive, good drivers will definitely be rewarded with discounts because the insurance companies want to have you as a client.

If you’re a bad or reckless driver?

You’re going to be penalized with higher rates.

And you know what?

Too bad!

Rate increases suck — we get it.

But, in our opinion, dangerous drivers should pay higher insurance rates.

And safe drivers should pay less.

So if you’re skeptical of telematics, you might want to look in the mirror and ask yourself, why?

Then there’s the privacy issue.

Yes, the insurance company is collecting data on you, and while it can be put to good use (lowering your premiums), not everyone is comfortable with the idea.

Of course, there’s a reason they want more data, and it’s not necessarily for evil purposes.

With more information, the insurance companies can further segment their clientele.

In the current model, insurance data is assumptive; it groups drivers together based on demographics like age, gender, and location.

And we look at how many kilometers you drive in a given year and how many claims you have on record. 

So what telematics does is allows car insurance companies to collect more accurate data to further segment their clientele.

Lo and behold, they’ll be able to provide a more appropriate insurance rate for each and every driver.

And it’ll be based on how you actually drive — not how they assume you drive based on your age or gender.

The upside: you pay for your driving habits, not someone that kind of sort of sounds like you.

If you’re a twenty-something male and your friends bug you for driving like a grandma, it’s time to cash in!

All kidding aside… we think the tradeoff can prove to be worth it. 

Still, you know it can’t all be sunshine and rainbows.

What’s behind the curtain?

Are the insurance companies doing this to make more money?

Of course they are! 

So we have to ask ourselves: where are they going with this?

Let’s look into the crystal ball.

As it stands, insurance companies only use your data to determine an accurate insurance price. For now.

But will that always be the case?

Now, keep in mind that the following is an opinion — not based on fact.

But this is where we see car insurance telematics going: when the big Quebec insurance companies — Intact, Desjardins, SSQ — have collected enough that they all have the same data, they will no longer enjoy a competitive advantage over their smaller competitors.

And that’s when they’ll start to share your data amongst themselves. 

We see insurance companies creating individual driver profiles, which is not necessarily a novel concept.

Today, at KBD, when you give us your driver’s license information, we go into a government-run database called the fichier central where we can access all your claims, dates, and amounts from the previous five years.

We think telematics providers will create the same sort of database that makes accessible each driver’s record, complete with their driving habits and history.

But don’t take this to be a total doom and gloom situation.

Quite the opposite, in our  minds. 

We say, if you do drive like a maniac, you should pay more for your auto insurance than the model driver that respects the speed limit and follows every rule.

So our advice is, if you’re a good driver, jump on telematics and save some money on your car insurance.

And if you’re reckless on the road?

Then you should probably avoid the program.

And, you know, maybe rethink the way you drive.