What is telematics car insurance?
Telematics insurance, sometimes referred to as ‘black box’ insurance, uses data about where, when and how you drive to help bring down the cost of car insurance.
A telematics box is installed inside your car, or in some cases you download an app to your mobile phone, to measure various aspects of your driving and share that data with your insurer. If you can demonstrate that you are a safe driver, your insurance premium will reduce.
It’s perhaps not surprise that telematics car insurance policies are gaining in popularity, especially for young and inexperienced drivers whose premiums can be sky high.
How telematics differs to other insurance policies
Unlike a standard car insurance policy, a telematics policy requires the installation of a black box device in your vehicle, or the downloading of an app to your mobile phone.
Car insurers always look at a number of risk factors before setting your premium. These include your age, where you live, your occupation and the make and model of the car you want to insure. What makes telematics policies different is that they also take into account your driving behaviour, particularly the length of journeys you typically undertake, the types of road you tend to use, what time you’re usually on the road, and how smoothly you drive.
Your telematics policy will initially cost pretty much the same as a normal policy, but as the insurer monitors your driving, it can start to adjust your premium. This will be done at monthly, quarterly or when the policy comes up for renewal.
You can also see the ‘scores’ you are getting as your driving is monitored, allowing you to make adjustments to improve your telematics performance.
Premiums tailored to you
The time of day and which roads you use, along with your driving style, have a big impact on your driving record, which in turn affects the premium you pay. For example, accidents are much more likely at night and in rush hour, and certain roads can be shown to be more dangerous.
With a telematics policy your insurer can track your time on the road and adjust your premiums to more accurately reflect the risk of a claim. For some drivers a telematics premium can be as much as £200 cheaper than a standard policy*
Who is black box insurance for?
The cost of car insurance can be a considerable strain on a motorist’s budget.
While the average car insurance premium is around £500**, inexperienced and young drivers can pay a particularly high price for car insurance. The statistics show that they are more likely to be involved in an accident and therefore more likely to make a claim, so premiums for young or inexperienced motorists can soar into the thousands of pounds, often making it unaffordable to run a car.
Choosing a telematics car insurance policy is one way to reduce your premium if you are in a high risk group, such as:
- inexperienced drivers
- less frequent drivers with a low annual mileage
- young drivers (under 25)
Cut the cost of cover for young drivers
Telematics insurance companies reckon they can cut the average car insurance premium by about 25% for safe drivers.
But some motorists can benefit from much bigger savings. Young drivers stand to gain from a telematics car insurance policy, as do motorists with driving convictions, who can often pay sky-high premiums. Telematics car insurance can also work to your advantage if you are a careful driver who rarely gets behind the wheel.
Charges and restrictions
If you are a young or inexperienced driver and think a telematics premium could save you money, you should also consider the potential disadvantages. Some telematics insurance policies impose restrictions on when and where you can use your car, for example ‘banning’ night-time driving.
Privacy is another consideration. You should always read carefully the firm’s commitment to the use of personal data.
Check also if the telematics insurance company charges for the black box and its installation – and what happens if this is damaged or if you choose to cancel the policy.
You should also ask about your ability to switch to a different insurer when it comes to renewal, and whether you’ll be able to take your telematics track record with you to a different insurance provider.
Choosing a telematics policy
Some experts believe telematics insurance will soon become the norm – interest is certainly high among young drivers in particular.
Compare telematics insurance premiums
Not surprisingly, more insurers are offering telematics car insurance policies, and you can compare premiums using MoneySuperMarket’s free independent comparison site to make sure you get the best deal.
Telematics car insurance providers all use similar technology, but the policies work slightly differently.
Some give you and annual mileage allowance (say, 5,000 miles) and then award bonus miles to careful drivers. Miles could also be deducted from the allowance for a number of risky activities including driving at rush hour or at night.
The data is then used to decide renewal premiums, with discounts for the safest motorists. Alternatively, you can pay for cover by the mile - and the price varies according to the time of the day or night that you take the car on the road.
Installing the Black Box
If you take out a telematics insurance policy, the insurer will either fit a black box to your car itself or send it to you through the post with instructions on how to install it. The black box is no bigger than a smartphone and is often attached to your dashboard.
Alternatively, you will be asked to download an app to your mobile device – and you’ll only be insured if you take your device with you when you drive (remembering never to use it to make calls or send texts or perform any other functions while you’re driving!).
In addition to monitoring where and when you drive, the black box also records how you handle the car – acceleration, braking, cornering and so on. This means that the telematics insurance provider will know whether you drive in rush hour, at high speed and whether you brake harshly and frequently.
If you have an accident
Fans of the black box argue that it encourages safer driving. The technology can also help to track down your vehicle if it is stolen and assist in managing a claim after an accident (it can often serve as an independent, objective witness to the events leading up to the crash).
Sources
*MoneySuperMarket car insurance data 1st – 28th Feb 2017
** MoneySuperMarket car insurance data 1st January – 31st March 2017
*** MoneySuperMarket car insurance data Feb 2016 vs 2017