What is Telematics Insurance?

Telematics insurance, also known as pay as you drive or black box insurance, is a fast-growing area of the car insurance industry.

Traditionally, insurance companies have based their premiums on factors such as driving experience and age. Telematics insurance works differently. A small black box is installed in the driver’s vehicle, which monitors a driver’s habits and behaviours. Alternatively, a mobile phone app can be used. Satellite technology is used to record and transmit data regarding a range of factors relating to drivers actions behind the wheel.

Rather than relying on general trends of driving habits across age groups, a black box is fitted to the driver’s car, which gathers electronic data to calculate and recalculate quotes based on driving behaviours, skills and habits. This data is then recorded and transmitted. This is a great way for drivers to prove to their insurance company that they are a safe driver.

What exactly is monitored depends on the company providing the telematics insurance policy. Typical factors that may be measured can include: type of road, speed, speed limit, forceful breaking and how you approach corners.

Depending on the policy provider, you may be issued with an initial driving allowance – a set amount of miles per day – which you could be penalised for exceeding. If more miles are required, these can generally be purchased at an additional cost. Insurers often reward safe driving with an extension to any set mileage.

Telematics insurance could be beneficial to certain groups, such as young drivers, whose insurance premiums are very high with standard policies. Providing the driver has good skills and habits, they may reap the benefits of a fairer premium. However, the policy may not benefit other drivers as much, who may find their premium would be lower through a standard insurance policy. It’s worth shopping around and looking into your options carefully.

The black box, a key component in this type of insurance, could also be beneficial for safety and security reasons. The black box device fitted to your car can help to locate it if it’s stolen. It can also alert the emergency services in the event of a serious accident. The information gathered could be used to assist with making an insurance claim.

However, it is also possible that some drivers will find that the recording of their driving behaviours will have a negative effect on their insurance premium. New drivers could also find that having a box which monitors their movements distracting and off putting, which could result in unsafe driving behaviours.  

In the future, it is possible that we may see a growth in the number of insurers offering telematics policies, as it may help insurers to monitor risk more accurately - keep an eye out when renewing your policy. 

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