“Good drivers should be rewarded for good driving.”
So said B.C. Attorney General David Eby in July following the release of an EY report that warned of spiking accident claims and soaring Insurance Corp. of British Columbia (ICBC) premiums.
The average B.C. driver will pay an additional $130 this year, thanks to a blended rate increase of 8%.
Young drivers are hit particularly hard because they’re classified as higher-risk drivers and already pay higher premiums.
But what if there were an app that could prove you’re a good driver and improve your driving?
Turns out there is such an app. It’s called usage-based insurance, and it’s now available in B.C. for the optional portion of auto insurance.
Belairdirect, which has offered usage-based insurance (UBI) in other provinces for a couple of years, recently entered the B.C. market.
The company offers a voluntary UBI product called automerit, a smartphone app that monitors driving habits and patterns.
Belairdirect offers an immediate 5% discount on optional insurance for customers who sign up for automerit, and drivers who use the app to improve their driving can get a discount of up to 25%.
And if you turn out to be less than stellar behind the wheel?
“There is no adverse impact on premiums if you’re a really bad driver,” said Henry Blumenthal, Belairdirect’s vice-president of sales and operations.
He added that only good drivers tend to sign up for automerit.
“It’s a voluntary program. People want to show us they’re better drivers.”
The automerit app can detect when a smartphone is moving, and assumes you are driving. It records things like how often – and how hard – you stop, as well as what time of day you travel.
When you stop moving, an alert on the app asks if you were driving instead of, say, travelling by bus or taxi.
If you answer that you were driving, it provides feedback on how well you did.
Generally, people who use it tend to become safer drivers, Blumenthal said, and see their premiums reduced.
In Alberta, Ontario and Quebec, where the company has offered automerit for a couple of years, Blumenthal said more than half of its auto insurance customers opt for automerit.
Usage-based auto insurance has been available in the U.S. for a few years.
Perhaps not surprisingly, the UBI uptake among young drivers is higher than among older drivers, according to a study of UBI use in the U.S. by Charles Weinberg and Miremad Soleymanian from the University of British Columbia’s Sauder School of Business.
Weinberg and Soleymanian were given access to a large U.S. insurance company’s data.
They found that 30% of new applicants for insurance opted for UBI. Adoption rates were more than 48% among drivers aged 18 to 35 compared with 30% for drivers above the age of 35.
They also found that younger drivers were more likely to improve their driving habits than older drivers who used UBI; female drivers were also more likely to improve their driving than male drivers.
Soleymanian said findings from the insurance company data set showed, on average, a 12% discount on insurance premiums.
Soleymanian had first-hand experience with UBI when he lived in Florida, where he got a 29% discount on his auto insurance.
The biggest concern over UBI is privacy. Some drivers might not want their auto insurance company tracking their every move, especially if it means the information could potentially be used against them in the event they are in an accident and the company uses the information to deny a claim.
“You’re clearly giving up your privacy,” Weinberg said. “But at least in the context of UBI, you know you’re giving up your privacy.”
UBI has been more popular in states and provinces where auto insurance is provided by the private sector. In B.C., all drivers must buy their basic auto insurance from ICBC. However, they can buy optional insurance from private insurance companies.
Even on the optional insurance side, Blumenthal said annual savings can range from $100 to $400.
Given the soaring accident rates in B.C., Weinberg said ICBC should consider using UBI in its mandatory coverage because it might improve the driving habits of accident-prone British Columbians.