Boxing clever on telematics

Telematics is one of the biggest things to hit the motor insurance market in years. Using satellite technology in a ‘black box’ device fitted in your car (or, increasingly, an app downloaded to your mobile), it monitors how and when you drive. The insurer uses the information to determine your risk profile and then charges accordingly – after factoring-in the usual considerations about your age, type of car, driving history and where you live. Insurers are particularly interested in your acceleration and braking habits, how you corner, and how fast you tend to drive. They’ll also take note of when you tend to be on the road – during rush hour, say, or late at night – and the types of road you drive on. Basically, they want to know if you’re the type of driver who’s likely to cause an accident, or to be involved in one on a busy highway. The main attraction for the motorist is that ‘safe’ driving attracts lower premiums. And because the policyholder can also review his or her own performance, they can spot areas where a change of driving style or habit could improve their safety rating and save them money. This will either be reflected in a lowering of premiums paid monthly (after, say, a three-month review period) or a rebate at the end of the year.

Parallel benefits

In addition to its role in motor insurance, telematics technology can also:
  • help track a stolen car
  • provide real-time feedback on driving and fuel consumption
  • trigger a call to the emergency services in the event of an accident
  • provide evidence to help determine liability after a crash.
Insurers have detected some resistance among potential telematics customers to the idea that their driving characteristics will be recorded, along with details of where they have driven, and when. Also, there is some suggestion that drivers fear the data recorded will be used by the insurer to reject any claims they make. It is thought that, as the uptake of telematics policies increases (there are around 500,000 such policies in force at the moment, with a steady rise expected in the coming years), uneasiness with the telematics concept will decline.

Money boxes?

Ultimately, telematics insurance will succeed if it can be shown to reduce insurance premiums. According to Towers Watson, the market analyst, 57% of British drivers would be interested in this sort of policy if it meant there would be a guarantee of no premium increase. With almost 30 million cars on the road, there is clear potential for a surge in uptake. One reason why telematics has to date grown at a relatively modest pace is that it has traditionally been marketed to young drivers as a way to tackle annual premiums that often passed the £2,000 mark. Policies have been sold with severe restrictions on annual mileage – say, 5,000 or 6,000 miles a year – as a way to keep a lid on premiums. This obviously makes them of limited appeal to many ‘normal’ motorists. Also, restrictions on driving at rush hour and at night have also rendered them impractical in many instances. But as telematics insurance matures and competition between insurers increases, restrictions are being relaxed or eliminated, making the policies attractive to a growing number of drivers. But Towers Watson’s research confirms there is widespread aversion among motorists to the potential for restrictions on where, when and how much they drive. So it seems most of us would be willing to take a few pointers on driving technique in return for lower premiums, so long as there is no suggestion that Big Brother is taking up permanent residence in our dashboards and app libraries.

Stay nimble

Whatever happens to the mechanics and marketing of telematics, it is important to remember that switching insurer at renewal is often the best way to get the most competitive deal. In other words, moving to a telematics provider shouldn’t mean you never test the market to see if a cheaper deal is available elsewhere – something you can do quickly and easily on our car insurance page. We’re seeing an increasing number of telematics policy quotes being run on our site, so if this type of insurance tickles your interest, let us search the market on your behalf. When you enter your quote details in response to our questions, we’ll automatically sift through all the insurers that might be interested in your business. The list of insurers you get (together with their prices) will therefore include telematics specialists – there’s no need to look for them separately.

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