Why you need to read the 'fine print' on your auto insurance policy

Bad driving habits prompts insurance rate increase

Most drivers who buy car insurance from GEICO are able to participate in DriveEasy, a safe-driving program that rewards or penalizes drivers based on their driving behaviour, also known as usage-based insurance (UBI).

Using sensors in your phone, DriveEasy automatically logs your driving behaviours, like how fast and far you drive, how hard you brake and how often you use your phone. Using this information, the DriveEasy program calculates a safe driving score. GEICO then factors your score into your insurance rate — either with a discount or a price hike — upon renewal.

In Canada, there are two types of UBI options on the market: Pay-as-you-drive and pay-how-you-drive insurance. The former uses a telematics box that is plugged into your car to measure how much you travel, offering a lower flat rate that increases the more you drive. This plan works best for people who drive less than 9,000 km a year. Two examples are the CAA MyPace program and the Allstate Drivewise.

Pay-how-you-drive, similar to DriveEasy, measures your driving behaviour rather than distance. Someone who breaks with enough time, doesn’t speed, and limits their driving to off-peak hours can see their premiums reduce. Furthermore, it can also record important information about a collision, such as your direction and speed prior to the accident and the force of impact. A selection of auto insurers offer similar variations on this type of coverage, including Belair Direct's Automerit, Intact's MyDrive and TD's MyAdvantage.

These programs aim to incentivize drivers to practice safe driving habits on the road — but it can also catch bad drivers, as Ayrial found out. Her problem with that was, as she claimed in her TikTok, she wasn't always the one driving.

To protect herself from a bad driving score, Ayrial said a GEICO customer service rep told her she should have switched her DriveEasy app settings to ‘passenger’ mode every time she got a ride with somebody else.

“That’s extra work for me. I don’t understand,” she said, adding that she didn’t “read the fine print” on her policy, which explained how the safe-driving app impacts insurance rates. It's also why Ayrial was so upset by the more than 50% increase in her care insurance rates.

“Give me a base pay and that’s what I pay,” she said. “If I’m not in an accident, it shouldn’t be extra. That’s like when you’re sick, you pay extra for health insurance. I’m not sick!”

Read More: Learn how to select auto insurance coverage and the factors that impact your rates

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Other factors causing auto insurance rates to rise

While bad driving habits can make a sizeable impact on a person's auto insurance rates, car thefts and costly repair or replacement costs to tech-heavy vehicles are also prompting increases in insurance prices, according to The Globe and Mail. In the same Globe article, Vice President of Insurance for Ratehub.ca, Matt Hands, explained that for most drivers in Canada there is little end in sight for larger year-over-year increases in the average cost of auto insurance premiums.

"It does feel like, at least from my experience, that we’re in an unprecedented time," he said.

"Replacing a windshield back in the day cost around $300, but these days windshields have a heads-up display," which alongside other newer technologies, can cost upwards of $2,000 to replace or repair, explains Hands.

The persistent threat of auto theft is also causing insurance rates to spike throughout Canada. In 2023, claims for replacing stolen vehicles in Canada rose 20% from the previous year to a record-breaking $1.5 billion, according to the Insurance Bureau of Canada. This is the second year in a row auto theft claims costs have topped $1 billion, compared to $556 million in claims that were filed between 2018 and 2021.

Read More: It pays to comparison shop in order to find the best rates on auto insurance

While insurance is going up vehicle prices are declining

While Ayrial’s car insurance rate increase was allegedly deemed a direct result of her driving score, many other drivers across the country have seen frustrating rate increases in recent years as a result of broader insurance market trends.

There are several factors driving up the cost of car insurance — from an increase in accident claims, litigation and medical costs for insurers to pay out (and price for), to higher repair costs due to inflation in the price of new and used vehicles, car parts and labour.

There is one silver lining to this dark cloud, which is that car prices are moderating after steeply increasingly during the COVID-19 pandemic. According to a report from Auto Trader prices for new automobiles stopped climbing last year and, towards the end of 2023, started to drop slightly. In October 2023, prices decreased by 0.4%, while in November 2023, prices dropped 0.1% and in December 2023, prices dropped 0.3%.

Read More: Protect yourself from legal problems or financial loss by learning to identify the most common auto insurance frauds

Sources

1. Ayrial.dan: "I hate it hereeee!"

2. Geico: DriveEasy

3. CAA: MyPace

4. Allstate: Drivewise

5. Belair Direct: Automerit

6. Intact: MyDrive

7. TD: MyAdvantage

8. *The Globe and Mail*: Auto insurance rates to rise in 2024 over record thefts, higher replacement costs car parts

9. Insurance Bureau of Canada: New data shows severity of Canada’s worsening auto theft crisis - Theft insurance claims top $1.5 billion in 2023

10. *Auto Trader*: Good News for Car Shoppers: Vehicle Prices Are Dropping