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Pay-as-you-go car insurance, is it for you?
With the recent announcement from CAA Insurance that pay-as-you-go car insurance is on its way to Ontario in July, we decided to offer some insight into the possible pros and cons of the new MyPace car insurance program.
On the surface, a pay-per-km car insurance premium based on how much you drive makes perfect sense. But will this type of system be a cost effective option for the average Ontario driver? Let’s take a look at a few common questions.
How does it work?
The new pay-as-you-go auto insurance plan unveiled by CAA utilizes the same telematics technology used in Buckley’s Plugn’SAVE rewards program. (Offering drivers additional discounts up to 30% based on their good driving habits.)
Drivers enrolled in the pay-as-you-go car insurance program will be given a small device to plug into their vehicle that will track usage and send data to a mobile app or web portal. The app will then allow users to monitor how much they are driving and how much they are paying for their car insurance based on mileage.
How much will it cost?
According to a recent announcement from CAA Insurance, drivers will still be charged a base premium. The amount charged will presumably be determined utilizing similar criteria currently used to rate auto insurance policies in Ontario. (With the exception of how many kilometres a person drives per year)
Drivers will then be charged an additional premium for every one thousand kilometres that they drive their car. That doesn’t sound like a bad idea if you are retired or if you use your car sparingly.
However, many insurance companies in Ontario already provide a low mileage discount for these drivers. So will pay-as-you-go car insurance really offer more savings to low mileage users? And what if you drive your vehicle more frequently; will there be a maximum monthly premium?
None of these questions were addressed in the recent press release, so it sounds like we may have to wait until later this summer to get the answers once more information is released.
Will I save more money?
Obviously this will depend on how often you drive your vehicle.
At first glance, it appears that if you drive less than 9,000km a year, then pay-as-you-go car insurance may be a good option to save money on your monthly car insurance bill.
However, for the average driver who travels approximately 18,000km per year according to Statistics Canada, it remains to be seen whether or not pay-as-you-go car insurance can actually provide any additional savings.
I guess we’ll find out in July when the new program is launched.
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