Insurance premiums have always been a relative number based on numerous factors. Data like driving record, age, and experience is used by insurance carriers to create premiums for insurance holders. While the current factors have some determining variables, the process is far from an exact science. However, with Telematics entering the equation for car insurance companies, insurance policies may become more standardized.
What Is Telematics?
Telematics is a field of research that will encapsulate telecommunications, vehicle technology, road transportation services, road safety, and other factors to provide measurements of traffic standards, driver performance, and other statistics.
Telematics is not necessarily a new idea.
Airplanes and commercial trucking vehicles currently carry “black boxes” that store the time, speed, and other measurements of transportation vehicles as they perform their normal operations. While black boxes are sophisticated pieces of equipment when compared to the data collection operations of a few decades ago, these devices only scratch the surface of the abilities of telematics.
Why Is Telematics Technology Popular Now?
Telematics has been an important part of society for some time; however, performing telematic research on a grand scale has proven difficult in the past. For example, a driver’s capability of reacting to outside stimuli has been regarded as important research data for decades. However, detailing and measuring driver reactions in organic settings requires electronic input and output devices that can assess data in the blink of an eye. Up until now, building such devices required more space, money, and materials than companies were willing to pay—but, as the innovation of electronics increases, so does that technology's accessibility to the general public.
In many ways, telematics is a data powerhouse. In the past, recording that data, storing that data, and analyzing that data would take hundreds of thousands of dollars. Now, the access to this data is much more accessible and affordable for insurance companies.
What Can Telematics Do for Insurance?
The integration of telematics into the business of insurance will allow companies to charge drivers more accurately based on their driving habits. If a driver is prone to speed, make irresponsible lane changes, and keep their hands off the wheel, telematics will inform an insurance company that this person poses a higher risk of insurance.
This means the driver’s insurance premium is likely to increase from what it is today. On the other hand, drivers who make safe lane changes, drive reasonable speeds, and are aware of their hand positioning on the wheel will be awarded with lower premiums.
Why Does Insurance Cost More for Different People?
Current insurance premiums are based on age, job, and driving record. Even though a particular 16-year-old girl may drive more efficiently than a 50-year old woman in some cases, the 16-year-old will be hit with insurance premiums based on collective data totals. With telematics, the girl may prove herself to be a competent driver despite her age. This would then make her insurance premium decrease due to her actual ability rather than her age.
In short, telematics will hold individuals accountable for their own insurance rates. It also means drivers will be given premiums based on ability rather than outcomes. A driving record may be marred by accidents that the driver didn’t cause. However, with telematics in the picture, the percentage of fault can be scientifically proven, and insurance rates can change based on pure science.