While telematics car coverage isn’t well-known, industry experts think it will revolutionize the motor insurance market.
How It Works
What is Telematics Insurance? Telematics insurance is basically a small computer embedded in your car that tells the insurer everything about your movements. It is small, about the size of a packet of cigarettes. The box is often plain black and small. This is why black box insurance is commonly used. It is similar to sat-navs but without the screen. The signal is sent up onto a satellite just like a Sat Nav, but it doesn’t bounce back to plot your location on a map. Instead, it stores the information in the central database of the Insurance company.
It can plot your location at any time with incredible accuracy up to five metres, just like sat-nav technology. Because the signals are constantly being sent, the computer can not only track your position but also your speed. It can calculate your speed, acceleration, and road position and plot it on a road map.
Telematics Insurance for Motorists: The Advantages
Motor insurance can be problematic because drivers are often lumped together and labeled. It is fine to be labelled as a positive driver, such as experienced and middle-aged, but it can also lead to annoying billing if you are not a good driver and are placed in a group with poor reputations. Examples include young drivers between 18 and 21, night club doormen, comedians, and drivers who were convicted.
You are immediately indicating that you are responsible driver by choosing telematics insurance. This is because you agree for your driving habits and actions to be monitored. Black box insurance quotes tend to be cheaper than comparable policies. Direct Line recently revealed that discounts up to 40% are possible.
Although police officers have different ways of working, they all follow the same principle: they reward responsible driving. You don’t have to worry about a computer tracking your movements if you are an experienced or sensible driver. Do you really care if your computer tracks you to the police station, the station car parking or the supermarket? You might have a different perspective if you’re a drug dealer, politician, or other sleazy person. However, the majority of people aren’t.
Drivers also learn to drive more safely when they see someone watching. This is akin to drivers slowing down if they see speed cameras. Drivers who are aware of the possibility of being monitored tend to be more careful, which is good for everyone.
Unrelated to this, the black box can be used as a tracker device that will provide police and insurance companies with exact location of your vehicle in case it is stolen.
Black Box Insurance’s Disadvantages
This is Big Brother at its worst. This means that “The Man” can see your location (or at least your car) at any moment. Your privacy is violated. Consumer action groups have a right to raise privacy concerns about accessing personal data, but they are unable to withstand the coming storm.
You will also be penalized for violating the insurance’s driving restrictions. It could be as simple as breaking a mileage limit or because the computer calculates that you are speeding. You should also know that different telematics insurance companies have different methods for penalities and fines. This can cause confusion when comparing policies.
Why are Motor Underwriters so in love with this technology?
Insurance is complicated by the old concept of uberrima fiedes, which is basically utmost good-faith. When it comes to requesting quotations, many policy holders are not ‘economical and truthful’. This is a clear breach of contract. However, it should be noted and corrected. Policyholders will also be in heated disagreement if their compensation monies are reduced or rejected.
Motor underwriters suffer the most financial loss from policies that are misrepresented and reduce drivers’ premiums. However, the claims do not get reported to the authorities. These shortfalls are often not noticed and can result in millions of pounds in lost revenue.
The motorist might consider them ‘little white lie’, which may be justified in lowering unnecessary expensive premiums. These will be viewed by the underwriters, and often the courts as misrepresentation or breach of contract. This is a significant factor. Consumer Intelligence conducted a poll of almost one thousand people on behalf Lexis Nexis. It found that nearly 25% of respondents thought that it was acceptable to omit facts or adjust facts when applying for a motor quotation.
The little black box allows the insurer to get a very good understanding of the motorist’s driving habits. While it might not be possible to determine if the policyholder is ‘fronting the’ policy for their teenage boy, but it can prove that the car was driven to a university parking lot five days per week, miles away than the building where the policyholder works.
It can also determine where the car is parked. Although the declaration might state that the car is safe and soundly stored in a garage at night, the satellites are able to plot where the car is parked. The applicant may also state that they drive only 2,000 miles per year, but if they exceed this figure in the first three months they will be quickly highlighted.
Although the policyholder may suggest that the car was stolen or torched after a hit-and-run accident, the car’s movements might indicate otherwise.
The telematics provider might impose restrictions on motorway driving or a curfew for driving after midnight, or prohibit parking in an unsafe area of town. Here is the proof that transgressions do occur.
If a driver has a clean driving record, the insurer may offer a discount on their premiums. It is because they are the kind of policyholder they want. Bad drivers could see their premiums increase or even be canceled. Insurers find this transparency a huge boon.
Future of Car Insurance
Many in the insurance industry believe that telematics policies are going to be the norm. While you can still buy a traditional policy with no black box, you will need to pay more to get it. Instead of opting in, you will opt out of the new standard of doing business.
This is an bold statement, as only 1% are currently British policies that use telematics. It is only 3% in Italy that uses this concept. But it is new technology. This technology is well-tested and well-tested and has been around for more than ten year. The cost of these little back boxes is now lower and may be replaced by more advanced equipment or ‘apps. All insurers will benefit from the improved results.
Indeed, 2014 was a landmark year with many motor underwriters offering Telematics Insurance policies. The providers will undoubtedly place a greater emphasis upon such policies in their marketing and advertising.
Some commentators envision a future where some insurers won’t deal with people without telematics devices. This is similar to the current refusal to offer quotes for drivers who have been drinking.
