Guide To Telematics And Car Insurance
If you have been searching for insurance recently you may well have come across the term “telematics”. As it isn't a term that rolls off the tongue for most drivers we have put together this guide to explain a little more.
Put incredibly simply, telematics is the technology that allows for transmission of useful information (data) over distance. It has been widely used in the vehicle industry and over the last couple of years it has been increasingly used in the development of car insurance.
What is telematics? The science bit.
Telematics is a branch of science concerned with using technological devices to transmit information across distances. It combines telecommunications with computing.
In the late 1970's the development of smaller and affordable computers became widespread. As those systems were distributed geographically, the need for exchange of data between systems became apparent. Telecommunications technologies were used to make this possible and the term 'telematics' was first coined in 1978 to describe the ability to connect computer terminals across networks.
Today, telematics applications are being used everywhere; taking money out at a cash point, or booking flights online are just two examples. Possibly the biggest technological application of the twentieth century to use telematics is the internet itself. The availability of an internet connection in 2011 is almost as important as having an electricity supply – and all of this development has taken place within the last 30 years!
How is telematics being used in motoring?
The use of telematics in motoring has introduced a new breed of road vehicles. It has been responsible for positioning technologies such as GPS (global positioning system) used in satellite navigation systems; emergency warning systems that support the emergency services and intelligent vehicle technologies that provide drivers with up-to-date information about road conditions and store data on journeys – consider flight recorders on aircraft. There are a vast range of applications for vehicle telematics and a growing area for its use is in the pricing of insurance policies.
Telematics and insurance:
GPS can be used to determine things like driver speed, the speed limit of the road being driven on, mileage and even the force at which a driver brakes, corners and accelerates. This data can be sent via GSM/GPRS (mobile and radio) technology to insurance companies who can take key information about driving habits and behaviour to price policies. Often it can result in discounts being made on premiums if drivers meet certain criteria set out by the insurer, such as lower mileage or evidence of careful driving.
This type of insurance - widely termed as ‘Pay as you go’ or ‘curfew’ – has been identified as a potential solution to the problem of inflation within the UK car insurance market. If insurers can use factual information such as reduced accident risk per mile or low average driving speeds, then they can reflect that in the pricing for customers who are presenting a lower risk. Without this information, insurers rely upon sets of assumptions that are made from factors such as age and claims history to price policies.
There are other benefits to having a device like this fitted in your car too. It is possible to add theft tracking that will allow for the vehicle’s location to be tracked if it is stolen and if you have an accident, important information about location, impact and time can be stored – all of which can be helpful in the event of a claim.
What does the device look like and how is it fitted?
The size and description of the box varies depending on which insurer you take out your policy with. Generally, they are described as being shaped like a mobile phone and no bigger than the size of your hand. They are normally installed behind the dashboard so that they are not visible and installation should not damage the vehicle.
The insurer should contact you shortly after the policy has been set up to arrange a time for installation that is convenient to you. This can often be arranged at your home or place of work.
Whether or not the device needs to be removed when your insurance expires is dependent upon the terms laid out by the individual insurer.
Do I have to pay for it?
You need to check this with the insurer as some do charge and others don’t. If you choose to cancel your policy you will most probably be charged extra to cover the cost of the device. Always check the policy details with the insurer.
Am I insured before it is fitted?
All of the telematics providers featured on Tiger.co.uk offer cover from the date the policy starts, but most reserve the right to cancel the policy if they are unable to fit the device within a certain period. The basis for the premium calculation during the period that the device is not fitted will depend on the individual insurer.
What happens to the data?
The use of data collected from your device will be governed by the policy terms and conditions that you will be asked to agree when taking out the policy. In general, the information will only ever be used to manage your insurance policy unless there are special circumstances (e.g. an accident or theft) that require further investigation of the data.
Which drivers can benefit from telematics based insurance?
In short, any driver who can make a cost saving from taking out a telematics policy over a standard policy will benefit.
Some products are specifically designed for younger drivers as they are a particularly high risk driver group. However, product design varies from insurer to insurer and other drivers, such as those with a low annual mileage (typically under 6,000 per annum) could find this type of product suitable to them also.
Which insurers offer these products?
A growing number of insurers are starting to introduce these products to market in the UK.
Aviva (then called Norwich Union) were the first insurer to introduce a telematics based product "Pay As You Drive™", but this product was withdrawn from the market in 2008. Since then a number of other insurers have brought out products, all of which are priced on different factors, here are just a few that are available through Tiger.co.uk:
- Insurethebox offers a telematics insurance product that is based on low annual mileage. Each policy allows a driver to drive 6,000 miles a year as standard with the ability to earn additional bonus miles each month.
- I-kube offers a product that is specifically for young drivers and sets a limit around the time of day that drivers can be on the road.
- Coverbox allows a driver to choose from a range of insurers, including the Co-op and Allianz, but charges dependent on the distance driven and when the driving takes place - with rush hour being the most expensive time to drive.
All insurers have different set up costs and different pricing structures so it is important to check the details on these policies with each insurer directly.
How do I get it?
Using a comparison site like Tiger.co.uk to obtain car insurance quotes will help you to determine whether a telematics based insurance product is the right product for you. At the time of writing Tiger.co.uk has more telematics providers on its panel than any other comparison site. As the basis for the policies vary it is important to check the detail with the insurance provider directly.
We hope that you find this guide useful and that it helps in getting you great insurance at a great price. Please forward a link to the guide to any friends and family that you think may benefit from it.