Discounts for careful drivers, surcharges for the more reckless: telematics is gradually transforming the relationship between insurers and drivers. Thanks to data collected via smartphones, premiums can be adjusted based on actual driving behavior—a business model that more and more insurers are adopting.

Building on the success of its initiative launched in Ontario in 2023, Wawanesa launched its Bonne conduite telematics program in Quebec at the beginning of February.

“In Ontario, the program was a success,” says Baldwin Diaz Acosta, Vice President for the Quebec Region at Wawanesa. “Among new [auto insurance] customers, 50% have the Drive Change program; that’s phenomenal.”

“In Quebec, 12% of new customers have already applied for the program,” says Diaz Acosta.

At Intact Insurance and Belairdirect, which share the same parent company, approximately two out of three new customers subscribe to the my Drive or Automerit programs. Intact told Insurance Portal in an email that the enrollment rate is 75% for new members at Belairdirect and 45% at Intact

However, telematics applications, which use GPS data from policyholders’ smartphones to assess their driving behavior, are not new. They have been available in Canada for at least fifteen years.

Driver behavior under study

Although marketed under different names, telematics programs that assess policyholders’ driving behavior operate in essentially the same way. They determine if the driver is exceeding the speed limit, if they are in a construction zone, or if there is heavy traffic, for example.

“The program evaluates driving behavior (speed, rapid acceleration, sudden braking, distractions caused by cell phones) as well as driving habits (distance travelled, time of day, regularity of trips). All of these elements are used to generate a score that is used to personalize the driver’s premium,” explains Desjardins in an email explaining how its Ajusto app works. When it was launched in 2013, policyholders had to install a device in their car; this is no longer necessary with the app.

This calculation then affects the insurance premium. According to insurers, the discount offered on the premium will vary from 15% to 30%.

“You don’t need to be a perfect driver to access the savings,” emphasizes Maria-José Perea, Digital Platforms & Telematics Director, Product Design at Intact. “We capture driving habits such as speed, smoothness, and alertness. Then we assess contextual factors.”

Conversely, Aviva, Desjardins, Belairdirect, Intact, and TD Insurance have implemented a surcharge for poor drivers. In this case, a more reckless driver could see their premium cost up to 30% higher.

The carrot and the stick

Like the carrot and the stick, the potential savings that drivers can generate motivate them to adopt better driving habits.

A survey published by the Société de l’assurance automobile du Québec (SAAQ) in 2020 indicated that 71% of the 1,158 respondents stated that there was a clear link between lower insurance premiums for driver’s licenses and vehicle registration and good driving behavior.

The same is true for insurance premiums, as demonstrated by a Léger survey conducted for Belairdirect: in 2017, 89% of Canadian drivers were willing to change their driving habits in exchange for a discount.

Among Wawanesa’s Ontario clients participating in the program, 85% of drivers received a discount on their premiums. At Desjardins, 90% of policyholders reduced or maintained their premiums, Desjardins confirmed in an email to the Insurance Portal.

“Everyone wins,” says Baldwin Diaz Acosta. “The program, on the one hand, reminds drivers that they have a role to play in road safety. If they drive safely, they are rewarded.”

“What we’re seeing is that people who engage in the most dangerous behaviors, those who take more risks, such as speeding, or who drive a lot in a day, are two to three times more likely to have accidents,” says Maria-José Perea.

She says Intact and Belairdirect have seen significant improvements thanks to the programs. “The approach is working,” she adds. “We’ve noticed that those who find themselves in a surcharge situation are more likely to correct their behavior quickly.”

At Promutuel, the Appi program has been around since 2017. Initially, good drivers could get up to 30% off their car insurance renewal. But the insurer has changed its approach: Appi now offers good drivers reward points that can be redeemed for electronic gift cards.