Telematics Insurance: What is it And why we should care?

Telematics Insurance: What is it And why we should care?

It goes under various names – black box insurance, pay as you drive, Smartbox, GPS or UBI (Usage-Based Insurance). It's a new kind of vehicle insurance, and the good news is that in some instances, depending on the car use, it can be cheaper than normal insurance. Up to now, all vehicle insurance has been based on past records of what groups of drivers in groups of vehicles do — how often claims are made, what for what they are made and how much has to be paid out. Now, that is all set to change. Know the black box insurance rules and how it works as well as black box insurance pros and cons.

With an electronic app (on a smartphone) or a piece of kit either built into the vehicle or added afterwards, the precise performance of the vehicle and individual driver can be measured and a premium calculated accordingly. The device finds safer drivers and rewards them — and that promises a big consumer gain. It also promises safer roads.

Telematics insurance is a type of car insurance that takes advantage of devices such as smartphone apps, cigarette-lighter plugs, smart tags, and onboard diagnostic devices.

The most common technology in telematics is black boxes fitted into customer vehicles. They're equipped with a GPS system, a motion sensor that provides information about the impact on the car (for example, as a result of an accident), a SIM card for transmitting data, and software that controls how the data is transmitted and analyzed. Black boxes are the most popular alternative because they provide precise data that is very hard to manipulate.

A telematics box measures various aspects of a customer's driving and sends the data to the insurer. The company can then analyze it to learn how safely the customer drives and adjust their premium accordingly.  

Insurance telematics provides the means for both the insurer and the insured to better manage driver behaviour, which can reduce loss ratios and deliver rewards for safer driving. It allows insurers to provide a more tailored approach to premiums associated with an individual's risk profile, enabling Cartrack to get the best possible premium for you.

The data can also be utilized to more accurately reconstruct accident scenes, therefore resulting in an easier and faster evaluation of claims and a reduction of the headaches involved in the aftermath of an accident or theft.

Frequently Asked Questions

Vehicle telematics is used to describe vehicle onboard communication services and applications that communicate with one another via GPS receivers and other telematics devices. The most common application of this is vehicle tracking.

Telematics systems work by connecting a device, such as a GPS tracker or other data logging tool, to an asset. Then, the tool collects key performance data about the asset. Once collected, the device will send the information to a data center where it can be collated, interpreted, and analyzed.

They use it to describe technology monitoring the movement of vehicles. Tracking work trucks on their daily routes is an example of telematics. ... The owner installs a GPS tracker unit into each truck. A smartphone app gives him data on all eight truck which he uses in a number of ways.

Logistics Industry: Telematics can aid in better commercial fleet management by improved tracking, flexibility in route planning, efficient use of capacity, reduced fuel consumption and thereby higher revenues.

How Does Telematics Car Insurance Work?

There is a certain stereotype that all young drivers are reckless drivers and are a big insurance risk. In fact, its only a minority of drivers who have serious (and thus extremely expensive) accidents – but all drivers have to pay for them. This can make it very difficult for young male drivers to get an insurance policy at an affordable rate.

A telematics system takes the form of a small, black box that's fitted onto your car, usually under the bonnet or dashboard (though this will depend on the actual device and your car's model). Don't worry, and you don't have to do this – take out a SmartMiles policy, and we'll arrange for your box to be installed by one of our professional engineers. Or, we can send you an easy to install box you can fit yourself. The telematics system is similar to the GPS on your smartphone or Sat Nav, in that it uses satellite technology and telemetry to gather data. One added benefit of this technology is if your car's stolen, having a black box will make it easier to track down and recover.

Telematics insurance can change this – offering an insurance premium calculated on the individual drivers actual driving behaviour – the mileage covered, the road used and the time used, the observance of speed limits, the smoothness of acceleration and slowing down. Black Box insurance allows drivers flexibility to choose when, where and how to drive in order to reduce premiums and also to maximize their security (from accidents). The data collected also records the exact position of the vehicle device at any time – useful, for example, to deter theft, though creating a privacy issue which all insurers are addressing.

When some people hear of black box insurance, they imagine that it is akin to the insurance of an aeroplane, but they are surprised to find out later that it is a pay as you drive car insurance that could save them a lot of cash. This kind of insurance relies on a small databox (black box) the size of a mobile cell phone fitted into your car by the insurance company. This box does not tamper with the normal car operations, nor does it affect the warranty. Moreover, less energy is required to power this device (less energy than your car radio), so you shouldn't worry about your car battery being drained.

What Is Data Collected by the Black Box?

 

  • The distance the car travels
  • The period of time the car is used
  • The location of your car all times (this is also a security benefit)
  • What type of roads is the driver travelling in
  • Speed and direction travel prior to and after a collision/accident
  • The driver's speed
  • The drivers braking behaviour
  • Force of impact in an accident/collision
  • Reports if any accident occurs

 

A type of car insurance which sees a small device, commonly called telematics or black box, fitted to your car to measure how you drive in order to reward safe drivers with a reduced premium. A number of car insurance providers now offer telematics, while predominantly aimed at younger, newer drivers looking for a way to reduce their monthly premium; a black box policy can help any good driver get a discounted policy. 

You can check your scoring online at all times. It's made for those who want the independence of their own vehicle, the pride of a new car and a way to ensure that they are driving safely.

Many of our customers treat the Telematics system like a game. Every journey is a challenge to get a perfect score. For parents, it offers extra assurance of their child's safety and for new drivers, guidance on their new driving skills.

How Is The Collected Data Used?

The collected data is analyzed by the insurance company and helps them in charging the insurance premiums and a multiplicity of other uses which include:

Mileage Policies

The insurance company recognizes that some drivers rarely use their cars, and if they do, they use them for local or short journeys, or maybe it is because they are trying to save on fuel. Such drivers drive their cars only a few thousand miles a year. The mileage policy is generally suitable for any type of a car where premiums are charged according to the number of miles you drive. If you can save your cost of fuel by reduced car use, why not reap benefits as well of reduced insurance premiums. Thus, those who drive fewer miles, and those who do not use their cars during the rush hours and at night benefit from lower premiums rates.

Assess My Driving

Some insurance companies use the black box technology to assess the drivers' acceleration, cornering and braking and use the information collected from assessment to offer discounts or premium loads depending on the scheme. The drivers need to select an appropriate scheme suitable for your driving pattern so at to reduce the premium costs. Features offered in various schemes include:

  • Higher mileage rates charging for use during peak/rush hours;
  • Higher mirage rates charges for young drivers during night hours especially during the weekends;
  • Higher mirage rates charges on dangerous routes;
  • Lower mirage rates charges to the drivers who adhere to speed limits and avoid sharp braking.

Accident rescue

In case you are involved in an accident in your car, the black box immediately alerts your insurance company of a sudden alteration in g-forces. The device can also be used as a telephone. Thus they call you to check on your status and to establish whether you require any emergency assistance. Moreover, the insurance company can immediately take down the details of the accident, which will hasten the claims process and deter the probability of any fraudulent claims by the other party involved in the accident.

Benefits of telematics for the insurance industry

Telematics opens the doors to developing user-based insurance (UBI) programs that match the current consumer demands regarding personalization and specialization. On the Italian market, 65% of insurers who joined the Connected Insurance Observatory saw a positive impact of telematics on their competitive advantage.

Insurance companies can use telematics data for assessing risk and calculating renewal premium costs. A smashing 90% of insurers surveyed by Willis Towers Watson said that telematics is going to impact rating and pricing within the next five years – and 80% of them believe the same is true for underwriting and risk selection.

Insurers also take advantage of telematics for processing and managing claims. Telematics will play an increasingly important role in claim triage and analytics, as well as loss control. Some insurance companies are already using this technology to track the location of stolen vehicles, provide assistance after accidents, and gain a better understanding of accidents to recover money from the person responsible.

The use of telematics helps insurers more accurately estimate accident damages and reduce fraud by enabling them to analyze the driving data (such as hard braking, speed, and time) during an accident. This additional data can also be used by insurers to refine or differentiate UBI products. Additionally, the ancillary safety benefits offered in conjunction with many telematics-based UBI programs also help to lower accident and vehicle theft-related costs by improving accident response time, allowing for stolen vehicles to be tracked and recovered, and monitoring driver safety. Telematics also allow fleets to determine the most efficient routes, saving them costs related to personnel, gas, and maintenance.

Ultimately, telematics helps to reduce the costs of car insurance and increases road safety by raising driver awareness.

Cheap rates for basic coverage options

It allows drivers to save on car insurance by encouraging safe driving behaviour and may be particularly well suited for drivers that are traditionally seen as high risk by insurance companies.

By analyzing data about a user's driving behaviour via a smartphone application, Its is able to reward good habits with lower premiums. Driving smoothly and below the speed limit, for example, can qualify drivers for cheaper quotes than those offered by traditional auto insurers.

Indeed, customer reviews suggest that claim to reduce the cost of auto insurance by up to 50% often holds true, resulting in substantial savings for policyholders. Drivers that might benefit the most from a policy include young drivers, and others considered high risk by traditional insurance companies. Because rates are based on actual behaviour, higher-risk drivers are likely to be penalized less when they demonstrate safe driving.

While users that don't drive particularly often will likely benefit from low-priced quotes, coverage options are relatively rudimentary. Some drivers may require special add-on coverages, such as gap insurance, to ensure a recently financed vehicle purchase. It does not currently offer gap insurance, among other add-on coverages.

Telematics in action

Here are 3 case studies that show how insurance companies use telematics today.

Nationwide

To insurer Nationwide decided to invest in UBI and developed a telematics insurance solution called SmartRide. This usage-based insurance program uses an OBD device plugged into the onboard diagnostic port of the car to collect mileage information and driver behaviour data. Customers receive coaching and feedback based on their behaviour and get to earn discounts up to 40% for safe driving. They also get a 10% discount during the first policy period upon enrollment. After a successful pilot program, SmartRide transitioned to production and now includes components such as an end-user portal for coaching and feedback, solution for data collection, transmission, and analysis, as well as dedicated account management.

The Co-Operators

The UBI program launched by The Co-Operators shows that insurance telematics can offer companies a lasting competitive advantage. The insurer implemented a telematics solution to use data at different points of their value chain. For example, in interactions with clients, the company was able to enhance the claims management process and offer users extra services with the help of collected data (like roadside assistance). The carrier also provides a mobile experience for customers in the form of an application where they can see their end of trip scores and receive behaviour-specific coaching.

Insurance Company 

Introduced an innovative UBI program called inControl™ to leverage telematics for their business. Teenage drivers and parents can use in control to get email or text alerts to monitor harsh braking or acceleration, speeding, unauthorized driving times, and unapproved driving locations. The solution also features a teenage driver coaching functionality. Drivers get access to real-time information about their driving habits through a web portal. By enrolling in the program, eligible drivers receive a 10% participation discount on their premium for the first twelve months. Policyholders can save up to 30% on their renewal premium based on their driving behaviour analyzed by the solution.

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