The Pros & Cons of Usage-Based Insurance

What are the Pros and Cons of Usage-Based Insurance?

If you're considering usage-based insurance, it's probably because you're interested in a possible discount on your car insurance rate. Most people consider that the biggest pro of UBI, which makes perfect sense. After all, insurance is about transferring risk from yourself to an insurance provider. If you're moving less risk than the average driver by not engaging in risky driving behaviours, it stands to reason that you should be about to pay less for your auto insurance premiums. Usage-based insurance programs are simply a way for insurance carriers to determine precisely how safe and low-risk your driving habits are.

That being said, there are some other pros and cons of UBI that are worth keeping in mind.

4 Pros of Usage-Based Insurance

1. Better Rates for New or Young Drivers: 

New drivers typically have to pay higher amounts for their car insurance premiums simply because they're inexperienced and statistically more likely to get into an accident. UBI allows new drivers to prove that they have safe, defensive driving behaviours to reduce that penalty for their lack of experience. The safer they drive, the greater their discount may be with usage-based insurance. 

2. Encourages Safe Driving Practices: 

Knowing that their driving practices are being monitored naturally encourages drivers to be mindful about their habits and makes them more likely to use caution when operating a vehicle, lowering the odds of a collision

3. Access to Driving Data: 

The data that is collected from your UBI program isn't just for your insurance company's eyes—you can also access it and see how you've been doing. That allows you to reinforce positive behaviours and identify areas that could use some improvement. In some programs, you may even be able to receive instant feedback from a usage-based app, such as notifications warning you that you're going too fast. This will allow you to immediately both lower your insurance rates, as well as drive safer.

4. Accident Investigation Assistance:

If you're involved in a collision, it can be challenging to prove that you're not the one at fault. In some cases, usage-based data can be used to assist in accident investigations and provide proof that you're not the at-fault driver.

3 Cons of Usage-Based Insurance

1. Privacy Concerns: 

Some people are concerned that the data collected could be sold to or used by third parties. However, strict rules exist about how the data can be used and by whom. Before signing up for this type of insurance, thoroughly review your insurance company's privacy policies and commitments. Your Morison Insurance broker would be happy to help you with this, if needed.

2. How Data is Assessed and Weighted:

As mentioned above, each insurance company has their own methods of assessing the data they collect, which may give more weight to certain metrics. Some drivers don't always agree with the way their data is assessed, so it's important to understand how it will be processed before signing up.

3. Information Being Out of Context: 

Usage-based devices and apps can glean much information, but they can't put it into context. For example, if a dog dashed out in front of your car and you were forced to slam on the brakes, the device wouldn't "know" that there was a legitimate reason for hard braking. However, one-off incidents like that are typically disregarded as insurance companies seek consistent driving behaviour patterns.

Your Decision

The decision of switching to UBI is entirely a personal choice, and you must make the best decision for you. Generally, if you are a more cautious driver who has good habits in an effort to maintain your clean driving record, the pros of making the switch to UBI is a lot more likely to outweigh the cons. It is also worth noting that while one insurance company’s way of measuring your safety might not be a good fit for you, another company might be exactly what you’re looking for. It's always important to speak with your broker to have them assist you in finding out which, if any company’s UBI plan is right for you.