Telematics car insurance, otherwise known blackbox insurance, is a new type of policy which has been introduced in an attempt to make car insurance affordable for those who have been penalised by disproportionately high premiums.
This move has been widely supported by those inside the industry, with research by MoneySupermarket suggesting that 5% of motorists have been forced to give up driving altogether due to rising running costs.
So how does telematics car insurance work and who stands to gain the most from these policies?
How does telematics car insurance work?
With telematics car insurance, the total fee which you pay to the insurer is calculated at the end of each month by looking at the number of miles that have been travelled over the period or the amount of harsh breaking, cornering or speeding you've done. This is calculated by a black box which is fitted into your car by the insurer.
It should be remembered that insurers will likely vary the amount charged for each mile completed depending on the time of day. You would have to pay more per mile for driving during peak hours than late at night for example, due to the increased statistical likelihood of accidents occurring. Devices may also look at the types of roads you have used; charging more per mile when using motorways.
It is also believed that some insurers will base calculations on driver behaviour; rewarding those who keep within speed limits and drive more carefully (i.e. brake and accelerate smoothly).
The benefits of telematics car insurance
Although you will have to give the insurer an initial deposit, telematics car insurance policies help avoid the sky high initial premiums which have been forcing motorists off the road.
It has mainly been introduced for the benefit of younger motorists, who have been on the receiving end of the highest premium rises of late. With MoneySupermarket reporting that the average driver between the ages of 17 and 22 is now paying £2,294 per year for their policies; £1,370 more than what is paid by the average motorist. With telematics insurance, these initial fees are avoided and young drivers can better control the amount that they pay annually for the policy by limiting the number of miles that they complete; allowing them to at least gain a foothold in the motoring world. This also enables them to accumulate one years no claims bonus which will help to significantly lower the cost of a conventional policy when they are able to afford the initial premiums.
Unlike with conventional policies, renewal prices will take into account your individual risk profile based on how you drive from the data collected the previous year; differentiating you from others in your group who are responsible for creating the ‘high risk young driver’ stigma.
However, it isn’t just young drivers who stand to gain through the use of telematics car insurance policies. People who mainly drive in the evening or during off peak hours would also be wise to investigate the possible savings they could make through taking this option. These black box recording systems can also be used as tracking devices if your vehicle is stolen; with standalone tracking systems often costing hundreds of pounds. In addition to this, the data recorded by the devices can also be used to accurately assign blame if an accident occurs; helping overcome those who are attempting insurance fraud.
The limitations of telematics car insurance
However, telematics car insurance will not work for everyone. People with a high annual mileage who drive regularly during peak hours would almost certainly find themselves paying more. Also, those drivers who may work nights, forcing them to potentially drive within the 'dangerous hours' of 11pm - 5am could be cut short.
The concept also has many critics from within the industry who believe that the systems are far too intrusive; fitting into the criticisms of the ‘Big Brother’ society that some believe we now live in. This was corroborated by the British Insurance Brokers Association’s Graeme Trudgill who commented: “customer don’t like the whole Big Brother attitude…they don’t like the fact that someone is going to know exactly where they’re going, at what time and at what speed as well”.
The Association of British Drivers (ABD) have also been critical of the systems; claiming that young drivers will only get better with more experience and that these type of systems will only “restrict them”.
Become a Drivers Edge UK member here.