Can telematics make car insurance cheaper?

Human error and human greed can disrupt and distort motor insurance claims following an accident. So why not remove the human element and let satellite technology and onboard computer power provide an objective record and assessment of the contentious events?

That’s the logic increasingly being promoted in a bid to drive down the cost of car insurance. Take the argument out of claims resolution, they say, and you save a lot of hassle for those administering the matter – and that means cost savings.

Eradicate the likelihood of fraud, runs the argument, and you remove unwarranted compensation payments and eliminate the involvement of the various organisations that thrive on the car insurance claims process.

Claims crisis

Ask two people for their version of events after a car crash and you could well get two answers, as each party tries to absolve themselves of blame, terrified of the impact it’ll have on the cost of their car insurance.

If there are no witnesses and it comes down to the word of one motorist over the other, because insurance claims are generally civil matters, insurers tend to contest and agree any liability apportionment between themselves.

The motor insurance industry is making great strides in the field of fraud prevention but the fact remains that many claims are wide open to fraudulent whiplash claims and other related scams. Indeed, fraudulent claims, particularly whiplash are thought to add as much as £50 to the price of a typical car insurance policy.

So is it time for the widespread use of telematics ‘black box’ technology to weed out the fraudsters and cut car cover costs?

Is it time for telematics?

If you’re not up to speed how telematics insurance works, it involves your insurer fitting your car with small device that relays information on your specific driving style, particularly how, when and where you drive.

Although still in its formative years, the demand for telematics car insurance is constantly growing, largely as a result of the genuine savings young drivers can make by having their insurance based more upon driving style and less on a set of crude assumptions about their irresponsibility on the road and propensity to be involved in accidents.

And while it can directly cut the cost of young drivers’ car insurance, there are calls to make its use more widespread and indirectly cut costs for all by identifying fraudulent claims, particularly in the wake of the growing number of so-called ‘crash-for-cash’ scams.

How can telematics tackle fraud?

In-car technology is already being used to settle fraudulent car insurance claims. Last year we reported on the extraordinary case of an MPV carrying four people cutting in front of an HGV as part of an attempted crash-for-cash scam.

The HGV had been fitted with a dash-mounted camera which recorded the whole incident and clearly showed the MPV deliberately cutting across three lanes to cause the crash. Amazingly no-one was injured and the haulage company’s insurer was spared a £75,000 whiplash pay-out.

But it doesn’t take an on-board camera to determine who’s at fault - a telematics box not only records how, when and where you’re driving, it also registers speed and can determine the point of impact, meaning insurers can conclude who was at fault and confirm the validity of any personal injury claims.

This means that fewer fraudulent claims should slip through the net and the savings made by the insurance industry can be passed on to customers, leading to cheaper insurance for all.

Will telematics go mainstream?

Although the technology is there and could easily be fitted to all our vehicles, it’s unlikely it’ll hit the mainstream just yet for the simple fact that the premiums on offer are not competitive for all types of motorist.

However, over the coming year smartphone apps are expected to take over from black boxes and so this could be one way the technology becomes more widespread. Admiral, for instance, has just launched the ‘Appy Driver’ app, which uses a badge system to incentivise road users to improve their road skills by allowing them to unlock additional badges based on their performance and earn premium discounts.

The app also comes with a ‘try before you buy’ option, which lets drivers try out and get used to the technology without committing to an annual policy. So even if it’s not used to calculate premiums, an insurer’s call to ‘download our app’ could be enough to encourage many more motorists to embrace the technology.

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