Known as usage-based insurance, a small wireless device is installed into a vehicle's diagnostic port and measures distance travelled annually, frequency of hard braking and acceleration, as well as time of day the vehicle is driven to determine savings on insurance.
Already in use in the United States, United Kingdom and some parts of Europe, usage-based insurance was recently launched in Ontario and Quebec on a voluntary basis by Desjardins Insurance and its subsidiary, The Personal Insurance Company.
"We cannot use the data to cancel, not renew or increase the premiums, or use it for a claim," said Denis Cote, vice-president of marketing at Desjardins.
"It's written in black and white on the conditions. The information is only accessible to the customer," he said.
A driver gets regular feedback by checking online and the program will show on a map where any hard braking was done and how many times, for example. But Cote said the program doesn't know a driver's destination.
The program, known as either "Ajusto" or "Intelauto," has more than 20,000 participants in both provinces and users can opt out of the program. Cote said Desjardins is planning to offer it through its subsidiaries in the rest of Canada once it gets regulatory approval.
"Once a month, we do update the savings you're going to get," he said, adding it also reduces the insurance company's costs as a result of better driving.
Customers can save up to a maximum of 25 per cent on their insurance. Cote said when Desjardins employees tested the program, the average savings was 12 per cent. Cote said the average premium for an Ontario driver is $2,500 so 12 per cent of that is close to $300.
"That's a few tanks of gas," he said.
While there have been some fears that privacy will be exploited through these telematics devices, Ontario's Privacy Commissioner Ann Cavoukian has said Desjardins has taken steps to protect customers' privacy, but she did note that if the vehicle was involved in an accident, police with a warrant would be able to access the information on the device.
Cote said the program hasn't been designed to monitor speed at this point.
Toronto resident Bonita Young recently installed the device in her car but hadn't yet completed enough time in the program to know her savings. So far, it has told her a few things about her driving habits.
"I seem to drive less than I thought I would," Young said. But it has told her that she did brake hard eight times and she has done a bit of fast acceleration. She also said she has "some moderate risk" because the device has noted some nighttime driving.
Young said she found the program initially challenging and she had to call for help.
"It wasn't overly clear," she said, adding she also had trouble finding the website to track her driving habits.
Analyst Duncan Stewart said he expects the technology will be popular with both drivers and insurers.
"I would be surprised if 50 per cent of Canadian vehicles don't have something like this within five years," said Stewart, director of research, technology, media and telecommunications at Deloitte Canada.
"This is part of an ongoing trend of making the connected car," he said.
Stewart expects car manufacturers could start building these telematics devices into every car or it could be a case of just plugging a smartphone into the vehicle to do the same thing.
"We know this is successful in the U.S. and the U.K. The folks doing this seem to have figured out most of the concerns around privacy."