What Is Telematics Car Insurance?
To create insurance premiums for policy holders, companies have always factored in a driver’s record, age, and experience. However, this common process is far from an exact science. Now with telematics entering the equation, car insurance companies can create more standardized policies. This in turn could reward safe, responsible drivers with lower insurance premiums.
What Is Telematics?
Telematics is a field of research that encapsulates the following and so much more:
- Vehicle technology
- Road transportation services
- Road safety
- Measurements of driver performance
- Vehicle diagnostics & alerts on required maintenance
Airplanes and commercial trucking vehicles currently carry “black boxes” that store the time, speed, and other measurements of these vehicles while they operate. Black boxes are sophisticated equipment, but these devices only scratch the surface of what telematics can do. With additional software and firmware becoming commonplace for commercial and government fleets, all the above information and other data can be displayed real-time to fleet managers and vehicle operators.
Why Are Telematics Solutions Popular Now?
For decades, a driver’s capability to react quickly and responsibly has been regarded as important research data. However, to measure and detail a driver’s reactions in an organic setting, it takes electronic devices that are sensitive and accurate enough to assess data in the blink of an eye. In the past, it would have taken hundreds of thousands of dollars to record, store, and analyze that data.
Understandably, companies were unwilling to pay for the space, money, and materials required to build such telematics devices—until now. As innovation in electronics increases, the accessibility of said technology also increases. Accordingly, telematics is now more accessible and affordable for insurance companies than ever before. But those are the corporations. What does this mean for car drivers themselves?
How Can Telematics Technology Affect Car Drivers?
Most insurance premiums are based on a person’s age, job, and driving record. If a particular 16-year-old girl drives more safely and efficiently than the average 50-year-old woman, that 16-year-old could still be hit with higher insurance premiums. This discrepancy in cost would be based solely on the collective data of teen drivers—not this specific teenager’s driving ability. With telematics, however, insurance companies can collect individualized data on a person’s capabilities, preventing certain drivers from being unfairly treated as a stereotypical member of their demographic.
Telematics systems can collect data on whether a driver:
- Uses the seatbelt
- Keeps their hands on the wheel
- Drives at reasonable speeds
- Makes safe lane changes
- Brakes too hard
- Accelerates aggressively
- Spends time idling
- Uses fuel inefficiently
For the vehicle itself, telematics technology can detect, display, and store information on:
- GPS location
- Battery health
- Engine diagnostics
- Auto defects that need repairs
- Proactive vehicle maintenance needs
Telematics systems can also provide drivers with an SOS button for emergencies, quick contact with roadside assistance companies, traffic navigation tools, and more. In some cases, it can also help you save money on your auto insurance coverage.
Can Telematics Help Me Lower My Car Insurance Premiums?
With usage-based insurance (UBI) plans, drivers can opt to have a telematics system installed in their vehicle. This software would collect data to rate their driving safety and be used to calculate that driver’s insurance premium. Take the earlier example of the safe teen driver. Telematics could help the responsible teenager get a better rate on insurance, because it would track her actual driving behaviors and reward her accordingly. On the flip side, if a 50-year-old woman drove more recklessly than her peers, she could find herself with higher premiums due to her risky driving patterns.
This is why you need to understand the fine print of any telematics car insurance plan. Some plans may give you the opportunity to lower your costs without a significant risk of incurring higher fees. Other companies may penalize you with higher premiums if they don’t approve of certain driving habits. Sometimes these penalized behaviors can include driving “too often” when it’s dark out or having a lengthier commute. This is not always the case, however. Telematics programs are gaining popularity for a reason. While not everyone wants their driving habits recorded and assessed, if you think you could earn lower insurance rates, there might be a telematics auto insurance plan that’s right for you.