Ontarians with usage-based insurance can now be penalized for risky driving

Given that Ontario has the second-highest car insurance costs in Canada, behind only British Columbia, it’s no wonder that drivers in the province turn to cheaper options like usage-based automobile insurance (UBI) if they think their good driving habits can catch them a decent deal.

UBI programs rely on telematics, a technology that enables vehicle tracking, to keep auto insurance companies informed about a person’s driving habits. Telematics capture and measure data specifically around acceleration, braking, cornering, and speed. Drivers who score well in these areas —- meaning they don’t slam on the brakes or consistently drive over the speed limit —- are considered low-risk, and can save as much as 30% on their annual premiums. 

Other factors insurance companies with UBI programs consider is how many kilometres someone’s driven, where exactly they’re travelling to, and at what time of day. These factors are often used to speculate the likelihood of future insurance claims, which is one of the greatest predictors of premiums.

Since its inception, UBI has existed solely as a positive reinforcement tool in Ontario by encouraging and rewarding safe driving. Until recently, if the data showed that drivers were exhibiting a little recklessness behind the wheel — like making sharp turns, for instance -— they wouldn’t be penalized; they just might not earn discounts on their premiums. But after recent changes implemented by the Financial Services Regulatory Authority of Ontario (FSRA), that’s no longer the case. Ontario auto insurance companies with UBI programs can now penalize drivers in the form or surcharges for high kilometres and any driving behaviour deemed “risky.” 

In 2016, the Financial Services Commission of Ontario (FSCO) — an organization that was replaced by FSRA in 2019 — released guidance stipulating that the data collected under UBI programs could not affect claims decisions, nor could it lead to surcharges or policy cancellations for drivers. The guidance stated that since UBI programs were still relatively new in Ontario, there was “uncertainty around the statistical accuracy and reliability of data.” 

In November 2020, however, FSRA removed that guidance, effectively allowing insurance companies to not only remove the discount for good driving but apply surcharges to drivers that exhibited risky road behaviour. FSRA said it made the change to benefit consumers and encourage competition with the hope that it will promote good driving among all drivers using UBI. It's up to insurance companies to decide when to adjust a driver’s premiums. Some might decide to wait until the renewal period; others might adjust premiums in halfway through the policy term.

“Many Ontario drivers have significantly changed their driving behaviour as a result of COVID-19. FSRA is working to make it possible for auto insurers to provide options for their customers,” said Tim Bzowey, executive vice president of auto/insurance products, in a news release. “We need to be responsive to the evolving needs of drivers and removing regulatory barriers for usage-based insurance is one example.”

The good news is: drivers currently paying for a UBI policy won’t be affected just yet. If auto insurance companies want to change their existing UBI programs or create new ones that reflect the new allowance for surcharges, they must first get approval from FSRA. If drivers have any questions about how this might impact their policy, they can reach out to their insurance broker or agent.