Telematics is the name for a broad range of technologies that monitor driving, communicate that data out of the car to a central server and make use of the data for various purposes. Telematics has been around for decades and is used for many purposes other than insurance. For instance fleets use it to ensure their drivers are taking the best routes, and telematics is also used in anti-theft devices in vehicles so enable tracking and recovery of stolen vehicles.
Telematics insurance is more specific: it refers to the use of a device that monitors driving and location to allow good drivers access to cheaper premiums. The device typically combines a GPS location signal with information from your car about corning, acceleration and braking and transmits this data to the insurer.
Q: Are telematics insurance policies always cheaper?
No, but they usually are. Bad drivers tend to avoid telematics hence the premiums tend to be lower as those with them make less claims. Those involved in fraudulent claims will also avoid telematics devices, further reducing the risk to insurers who can pass that on in lower premiums. There is the risk that bad drivers could see their premiums rise as a result of using a telematics policy however – so if you are warned by your insurer to improve your driving you should ensure that you give up on your bad driving habits. Similarly a pay as you drive policy which is based on mileage will only save money for those whose mileage is below average, those who use their car for long distance commuting for instance should avoid this type of policy.
Q: How do telematics policies monitor driving?
Mileage based telematics insurance policies simply using GPS to track how far the car has travelled. This is a quite accurate way of knowing the mileage, and you’ll only pay for how many miles you actually drive.
More complex telematics policies that monitor how you drive collect other data in addition to this. They use the GPS not just for how far you’ve travelled, but also factors such as how fast you’re going, what roads you drive on, and when the GPS signal is good enough factors such as your road position. The data can be combined with information about braking and acceleration to get an overall idea of how good a driver you are. For instance this data can be used to see if you ‘corner’ at speed or not, or if you brake at the last minute.
Typically it’s not the individual incidents that count but the overall driving pattern. So you shouldn’t be too worried if you just had to brake hard for instance, as long you don’t do this regularly. There are some exceptions though – going 80mph in a 40mph zone isn’t going to be looked on too kindly by your insurer even if it only happens once.
Q: Will going over the speed limit affect my premium with telematic insurance policies?
With telematics policies that track ‘how you drive’ rather than just ‘as you drive’ going over the speed limit can affect your premium. Typically policies require persistent speeding for any change to the premium to be made, so occasionally going a few miles over the limit by accident might not affect your premium. If you fail to change your driving habits after being warned about speeding, the insurer may even cancel your policy as they view you as too high of a risk. Check the individual policies of each insurer to know how they use speed limit violations to alter premiums.
Q: The insurer knows precisely how many miles I’ve driven, does that mean I will be charged more if I go over what I predicted?
When you sign up for any car insurance policy you are asked to provide an estimate of how many miles you will drive in the year. This obviously isn’t a precise figure and it’s always quite difficult to predict. With non-telematics policies the insurer can’t really monitor if the figure you put in is accurate, however with telematics policies they will be monitoring this using the GPS chip.
Some policies are very much based on mileage, and if you go over the number of miles you’ve purchased you’ll have to purchase more or have your premium raised automatically. With other policies that take in overall driving, some won’t charge you extra if you only go slightly over what you predicted. If you are worried about this it’s best to check the insurers policy documents or to contact them directly, as each insurer has different policies.
Q: Do telematics insurance policies offer cashback or refunds for good driving?
Some do, some already factor in a discount for good driving so don’t. Check with each insurer if you’ll be entitled to a refund or not. With mileage based policies often you’ll find that you will be entitled to a refund if you underuse the miles purchased, but this is not universally the case. Premium alternations – either up or down – usually happen at set intervals, such as every quarter.
Q: Are all cars capable of using telematics?
Almost every vehicle can be fitted with telematics devices. However fitting them isn’t always easy, and many insurers will insist that an engineer from an approval shortlist installs the device for you. Fitting the devices is generally quite quick, typically within an hour or so.
Q: Where are telematics boxes fitted?
Typically the devices are fitted immediately behind the dashboard of the vehicle because this is far from areas that may be damaged in a crash. The device is typically a very small box, no bigger than a smartphone or wallet.
Q: Are telematics boxes provided free by the insurer?
Not always, and even if they are not all will pay for the installation. Remember though that you are paying for the box one way or another – and if not up front it will be through slightly higher premiums.
Q: Will my telematics policy place restrictions on where and when I can drive?
Typically no, although some policies aimed at younger drivers may offer lower premiums in return for banning nighttime driving or driving on certain types of roads such as motorways.
Q: Is my data safe with the insurance company?
Typically yes – insurance companies are obligated under law to keep your information private and secure. However they may be required to release the information to the authorities, for instance if a court orders them to do so. They may also use third party companies to price your premium, and if so your data will also be transmitted to them – although they will also be governed by strict privacy regulations.
Q: Can my parents / family see information about my driving?
Some policies allow you to make this choice when you sign up. However the insurer can not give the information out without your permission. If your family have set up the policy for you they might have access to your account, so if you are worried it is best to sign up for the policy yourself.
Q: Do telematics companies provide online dashboards to help improve my driving?
Some do. What is offered by them changes from insurer to insurer, but you’ll often find personalised advice on how to improve your driving and might even see a map overlay of your driving. Some will also provide you with anonymised data from others using the telematics policy to see how you compare to them.
Q: Several people drive the car, does this affect the premiums?
Most telematics policies cover the car and do not know who is driving, therefore anyone who drives the car is affecting the pricing of the premiums. There are a few exceptions where driver ID is taken, but these are largely restricted to the fleet telematics insurance offerings.
Q: Do telematics policies have no claims discounts?
Yes. Like non-telematics car insurance policies no claims discounts are available with most telematics policies. However the discounts might not be as high as your driving performance is used to make discounts in addition to having made no claims.