Auto Insurance

What is usage-based insurance, and should you opt for it?

By: Shaistha Khan on April 20, 2023
Article image

With reduced car usage during the COVID-19 pandemic, 43% of Canadians were reportedly opting for telematics-based insurance. And while many are now back into the office or commuting for a hybrid schedule, there continues to be a demand for usage-based insurance (UBI). 

According to data, interest in UBI quotes have increased an average of 41% each month from October 2022 to February, this year. 

What is usage-based insurance? 

Telematics is the use of smart technology, like smartphone apps and diagnostics, to monitor driving habits. This can mean measuring how often the driver speeds, brakes harshly, steers, corners, or is distracted while driving. Other metrics like distance travelled, location, terrain, and time that the car was in use may also be measured. For drivers who have opted for UBI coverage, most insurance providers offer up to 30% discount on annual insurance premiums if they demonstrate good driving behaviour. 

UBI is currently available in Ontario, Alberta, Quebec, Prince Edward Island, New Brunswick, and Nova Scotia.  

Up until 2020, there were no penalties for UBI drivers who engaged in dangerous driving behaviours. However, three years ago, the Financial Services Regulatory Authority of Ontario (FSRA) released a guidance that allows car insurance companies to penalize drivers who demonstrate risky driving behaviour. Both the measures – a reduced auto insurance premium to incentivize good, and a higher surcharge to penalize bad driving behaviour – are meant to encourage competition and innovation in the insurance industry, FSRA notes in its press statement

What parameters are tracked and how they are used to reduce premiums (or add a surcharge) differs from insurance company to company. 

With high auto insurance premiums, there’s a 41% increase in drivers opting for UBI 

Inflation, the high cost of vehicle replacement parts, and a supply-chain shortage of vehicle parts are a few reasons why customers may be seeing higher rates when renewing their auto insurance premiums. 

Jennifer Krasic, an insurance expert with notes that the cost of living, in general, has increased and people are still feeling the effects of the COVID-19 pandemic. “Consumers are looking to save anywhere possible,” she says. 

As auto insurance rates are on the rise, more people are looking at UBI as an alternative to save some money.’s quoter data demonstrates that there has been an average of 41% month-over-month increase from October of last year up to February of this year.  

“UBI is becoming more popular as more and more insurance companies are starting to offer this coverage,” Krasic explains. “These programs provide updates on your driving behaviour and overall discount accumulated during the time period. It also offers an upfront saving for enrolling,” she says. 

UBI has also been gaining more popularity through word-of-mouth. “Individuals are always resistant to change but are more likely to switch once they [learn about] the benefits through family and friends,” she adds. 

Which type of UBI coverage should you opt for? 

There are two types of UBI coverage one can opt for: Pay-as-you-drive and pay-as-you-go


The pay-as-you-drive is a policy that any driver can enroll in and immediately benefit from by demonstrating a good driving record. Pay-as-you-drive is essentially UBI, which means that the driver benefits from making sure that they don’t brake, steer, or corner harshly. 

It provides savings up front for the driver by simply signing up. This coverage may be particularly beneficial to new drivers – like a teenage driver – to incentivize good driving habits. 


On the other hand, pay-as-you-go charges the driver based on the number of kilometres driven throughout the years. “Typically, this type of program has a maximum number of kilometres and drivers that exceed that threshold would be charged an additional fee,” explains Krasic.  

The Canadian Automobile Association’s (CAA) MyPace telematics app, for instance, recently increased its mileage threshold from 9,000 to 12,000 kilometres per year. Depending on their usage, drivers can save up to 60%, allowing them to take greater control over how much they’re paying in auto insurance premiums. 

Pay-as-you-go is typically suited for those that may be driving for a very few kilometers annually, such as retirees or people working full-time from home. “This is also a great option for those that have recreational summer vehicles,” Krasic says. If drivers don’t want to suspend auto insurance coverage on their vehicles during the winter, pay-as-you-go coverage can be beneficial – as they can drive the vehicle even on a nice, sunny day in January. 

Another way to save on auto insurance is to compare auto insurance rates or speak with an insurance company to see what they can offer for your driving requirements and habits.  

Read more: Is usage-based insurance a good idea? We asked industry experts for their thoughts

Save 20% on average on car insurance

Compare quotes from 50+ Canadian providers in 3 minutes.