Black Box Insurance Limitations and Disadvantages

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Telematics insurance can be a great way of reducing your car insurance premiums. But it isn’t the best option for everyone. Some drivers would see their premiums increase by using telematics, and there are other concerns too. Some policies have curfews, or charge extra for driving at peak times. The devices often can’t differentiate between the drivers of a car, and there’s also privacy concerns.

Bad driving habits

Telematics policies that monitor driving performance are designed to award good drivers. The flip side to this is of course that drivers with bad habits will see their premiums increase.

Telematics devices can monitor what speed you’re driving at, so those who regularly go over the speed limit will see their premiums increase or even the insurer cancelling their policy. One off speed limit violations typically aren’t going to affect your premium, but regularly speeding certainly will.

It’s not just speeding though. It’s also about how you drive, with driving position, and how you brake and accelerate taken into account. Hard braking and sudden acceleration will lead to an increase in premiums: not only is driving this way not fuel efficient, but it’s also dangerous.

When and Where

It’s not just how you drive that can affect your premiums. Some policies will also either impose a curfew on driving at certain hours, or charge a higher rate for driving during specified periods.

Typical times for curfews are late at night – for instance between 11pm and 5am. The exact times change from insurer to insurer. Not all telematics policies include curfews, only a minority, but the ones that do tend to offer better premiums.

Some policies also charge more for driving at certain hours. Typically this is during rush hour, when accidents are more likely to take place due to the sheer volume of traffic on the roads. If you’ve got a regular 9 to 5 job your commute can really eliminate any savings you’d get from a telematics policy that imposes higher rates for driving at these times. Not all telematics policies do charge extra though.

Location and roads you drive on can also affect your premiums. Driving on roads known to be accident black spots will increase your premiums with some providers. Similarly where you work or live can affect premiums.

Other disadvantages

Unlike fleet telematics insurance policies, telematics car insurance aimed at individual customers won’t usually be able to tell who is driving the insured vehicle. This means that if there’s a secondary driver who isn’t a particularly good driver, even their infrequent driving could negatively affect the entire insurance policy premiums. An example of where this could happen is if a new driver, for instance a son or daughter who just passed, occasionally drives their parents car which has a telematics insurance policy.

Privacy concerns have also been raised around telematics. While data is treated with the upmost privacy and security by insurers, there’s also a risk that hackers could get hold of it no matter how many precautions are put in place. Furthermore with fleet telematics your boss could be keeping an eye on where you drive even out of working hours. There’s also the possibility that the intelligence services are keeping an eye on your whereabouts, or that a court could order the insurer to disclose the information during a trial. Even if none of this actually happens, the stress of fearing that it might can negatively affect some drivers.

Telematics devices also cost money. Even if the insurer gives you a box for free, you’ll be paying for the equipment in another way: through higher premiums. It’s likely that good drivers will still get lower insurance, but their premiums will be covering another expense that non-telematics premiums don’t have to pay for.

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Robert Prime launched telematics.com in early 2013 and has over 10 years experience in the financial sector. He specialises in business startups and online marketing with a passion for new technology.