Usage-based auto insurance programs typically only reward policyholders with premium discounts for good driving behaviour, but a new ruling could allow insurers to also charge policyholders extra for poor driver safety.
Ontario’s Financial Services Regulatory Authority (FSRA) recently approved a change which allows Travelers Canada Insurance to charge usage-based auto insurance policyholders partaking in risky driving behaviour a 10% surcharge.
Some industry experts believe that FSRA’s approval of such a measure could set a trend for other insurers to implement similar penalty systems for their usage-based auto programs.
“Now this is a monumental decision that FSRA has approved which will now allow surcharges to be applied for people who exhibit bad driving behavior,” RateHub.ca director of insurance Matt Hands told CTV News.
Hands also said that automobiles currently fitted with telematics devices will not be affected – for now, until other insurers seek permission from the FSRA to raise rates for bad drivers.
“If you’re somebody who is not convinced you are going to live up to the standards of the program, you have to be aware that now that there could be a surcharge and that these usage-based insurance programs might not be right for you,” he warned.
“Once one company is allowed to do this, all will follow and they will use the same rationale,” added University of Toronto professor of organizational behaviour David Zweig.
Zweig added that consumers should be careful about agreeing to allow their personal information to be collected by insurers, since they run the risk that their behaviours could be used against them.
“I understand the desire to reduce premiums, but you have to ask yourself, at what cost? Is the fact that you are giving all this information to your insurance company worth a few dollars off your monthly premiums if the information could be used against you?” he said.
In a statement to CTV News, Travelers Insurance said that its IntelliDrive app allows the company to “personalize” auto insurance pricing by basing it on an individual’s known driving behaviour.
“Not only can this save good drivers money, but it can also incentivize any driver who purchases the product to practice safe habits behind the wheel,” the company said.
