Telematics Insurance Explained

Young drivers facing sky high insurance premiums often feel that they have hit a financial roadblock, but luckily help is at hand, and it comes in the shape of a 'little black box'.

As a young driver it seems unfair that car insurance is most expensive when you can least afford it, but take a quick look at the statistics and everything begins to make sense. One in five drivers will crash in their first year behind the wheel1, and each year more than 38,000 people are injured or killed in crashes involving drivers with less than two years' experience2.

It makes for sobering reading, and it's hardly surprising that higher risk means higher premiums. However, if you dig a little deeper into the statistics, you find that young drivers have a higher proportion of crashes in the evenings and early mornings, and this has got a lot of insurance providers thinking.

One rather neat solution is to use a vehicle tracking device to monitor car usage and ask that the vehicle is only driven during 'safe hours'. Typically this means no driving after dark, or more specifically between the hours of 11.00pm and 5.00am. It's a system known as 'GPS-Tracked Insurance' or 'Telematics', and it seems a small price to pay for some serious savings.

So how does it work? The first step is for your insurance provider to fit your car with a GPS device, typically behind the dashboard. Most companies lease the GPS 'black box' for an annual fee of 200-300. The GPS allows the provider to make sure that the car isn't being used when it shouldn't be, and you'll be charged extra if you drive outside the agreed hours.

Public opinion surrounding GPS tracked insurance has been mostly positive. Parents are comfortable with the fact that their children are on the roads when it's safest, and while young drivers might resent the restrictions, they agree that it's better to be out driving until 11.00pm, than stuck at home saving-up for insurance they can't afford.

More advanced Telematics Insurance packages go one step further by feeding real-time driving data back to the insurance provider, including: speed, cornering, braking, acceleration and time of driving. The data is then used to 'score' the individual driver's road safety and their premium is set accordingly. Drivers can then log-on to a personal page on the insurer's website to check their scores and see where there is room for improvement.

The Media is also getting behind Telematics Insurance, and are happy to have a 'good news' story to report. Recent statistics3 have shown that young drivers can expect savings of 50% with Telematics Insurance and enjoy a 20% reduction in the number of accidents. Not bad if you consider the only real price you're paying is staying off the roads when you'd normally be in bed!

A growing number of providers now offer Telematics Insurance, and it's a trend that looks set to continue. Consider that the impending EU legislation prohibits the selling of 'women's car insurance' as sexist, and 'elderly driver's insurance' as ageist (although both groups are statistically safer on the roads than most), and you can see that being judged on your individual merits could pay serious dividends. In fact, a report by Ptolemus Consulting Group (May 2012) estimated there to be 2 to 2.5 million vehicles fitted with Telematics Insurance systems in Europe today; a figure that's predicted to rise to 60 million cars by the end of the decade.

1. Driving Standards Agency.
2. Department for Transport.
3. From an analysis of 10,000 young drivers (aged 17-24) who signed-up for the Co-operative's Smartbox scheme.


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