Telematics & Car Insurance: What You Need to Know About Usage-Based Insurance

While car driving on asphalt on sunny day

Telematics, also known as pay-as-you-drive insurance, black box insurance, or usage-based insurance (UBI) is a type of policy that calculates your insurance based on how you drive. This system was designed to reward drivers who drive short distances, infrequently, and sensibly. But is it the right car insurance choice for everyone?

The idea of telematics car insurance is becoming more popular in Canada and the United Kingdom with more insurance companies offer usage-based policies through apps that you can install directly on your phone.

Telematics are currently being offered in Ontario, Nova Scotia, New Brunswick, Quebec, and Alberta with other jurisdictions across the country taking this insurance system into serious consideration.

Interested in learning more? Keep reading to find out how telematics work and how this innovative type of car insurance can benefit your policy:

How Does Telematics Car Insurance Work?

Telematics car insurance works by having a small piece of technology installed in your car that combines telecommunications technology including wireless devices like cellphones and GPS.

This small piece of tech, or “black box” is physically installed in your vehicle or downloaded as a smartphone app. It links to a GPS device that measures the data. This data is converted into a score and transmitted to the insurance company.

This device tracks your driving such as how far you travel, the time of day you drive, how fast you accelerate, and how aggressively you brake.

These metrics are tracked in order to customize your insurance policy to your pattern of driving by monitoring your driving behaviours in real-time.

There are some insurance providers that use telematics to monitor key risk factors – if you exhibit better driving habits or improve your driving behaviour, you can possibly save on your insurance premiums.

The Benefits of Telematics for Your Car Insurance

Man, woman, and child driving in a sunny vehicle

If you’re a good driver, telematics car insurance can save you money. For example, if you only drive short distances and maintain slower speeds, you could receive a cheaper insurance rate. On the other hand, if you drive over long distances at higher speeds you could end up paying more.

However, this can be beneficial for everyone since the insurance companies can also monitor improvements in driving habits. Some insurers will look at your data every few months to see if there are any positive changes in the way you drive and possibly reduce your premium based on improvements. Most insurers will also allow you to track your own statistics online so you can keep an eye on your driving behaviour.

Telematics means that your insurance pricing is individualized rather than having rates based on traditional car insurance data such as gender, age, previous claims, etc. This is to make premium costs more precise. Keep in mind that telematics is specific to the vehicle and not necessarily the driver. Your premium will reflect the driving habits of anyone who drives your car, such as your teenage children.

Telematics also uses data to ensure accuracy when you file a claim by analyzing driving information at the time of an accident to reduce fraud. In some cases, your insurance company may also be able to track your car if it is stolen using telematics.

Here’s a breakdown of the pros and cons of telematics car insurance:


  • Good, low-risk drivers can enjoy cheaper insurance
  • Drivers can receive a premium discount by reducing their travel distance and driving more carefully
  • These discounts encourage safe driving and reduce the number of accidents
  • In Canada, the data collected through telematics is protected under strict privacy policies and cannot be used without your consent


  • The circumstances surrounding your driving behaviour, such as braking hard to avoid an obstacle that suddenly appears in your path, is not recorded in the data
  • In some provinces, such as Quebec, poor driving habits can actually increase your premium

An analysis of over 160,000 reviews from drivers who use telematics indicates that customers rate insurance companies offering telematics devices highly, with an average rating of 4.5 out of 5. 

Overall, most insurance customers who use telematics devices are pleased with the results, particularly praising their satisfaction with the discounts and savings they receive. 

Telematics and Young Drivers

Telematics makes it easier for family members to keep track of young drivers in their family by keeping tabs on their location and driving behaviour. Not only do telematics give parents peace of mind, young drivers can also benefit from annual premium reductions, helping them save for life goals such as going to university or buying a house.

Because telematics help reduce premium costs based on good driving habits, it can help encourage new drivers to drive more safely and reduce the risk of having an accident or suffering an injury.

The Future of Telematics

The number of insurance companies offering telematics is expected to increase, especially in Canada where insurers are learning from the experiences of telematics usage in the United States and Europe.

Using telematics is one of the many ways that insurers can offer discounts, calculating savings based on the risks you represent. When shopping around for car insurance, telematics can potentially save you hundreds on insurance – so it’s worth considering a program that uses your own safe driving behaviours to help you save money.

Not only that, but it helps you become a better driver and create a safer environment on the roads.

Feel More Confident Behind the Wheel

Telematics is an exciting technology that is continually evolving, allowing drivers to become more confident behind the wheel and enjoy lower insurance premiums based on their good driving habits.

Over time, auto insurance companies will see fewer claims and have the information they need to reduce insurance fraud and lower insurance costs – and everyone will enjoy safer roads! It’s a win-win!

If you’re interested in learning more about telematics and car insurance, feel free to get in touch with one of our knowledgeable Edmonton insurance brokers. Our friendly and supportive staff will help you find the perfect insurance products to suit your unique needs.