Telematics car insurance policies, also known as Black Box policies, are designed to help you get a cheaper quote. This is achieved by the insurance company being able to collect various data relating to how and where you drive. It then uses this information to better understand the risk involved in insuring you.
In addition to collecting, tracking and monitoring data, telematics policies often include restrictions in the terms and conditions of the policy document. These restrictions can include the amount of mileage you're able to do and in some cases the time of day you're allowed to drive the car.
For example, you may be restricted to 6,000 miles a year with a condition that you can only drive in daylight hours.
Each insurer will have their own rules so always read the policy wording before buying the cover.
The most common solution for recording data is through the installation of a small device (known as a black box). This box is usually fitted behind the dashboard, stuck to the inside of the windscreen or sometimes on the car battery. It generally takes just a few minutes to install.
The box is supplied by the insurer and in many cases, you can fit the device yourself. Where this is not possible, the insurer will arrange an engineer to come to your home and fit the device for you.
Data collected by Black Box Telematics
The information monitored and recorded can differ between specific insurance companies but can include some or all of the following:
The black box device uses the Global Positioning System, a satellite based navigational system that can track your car real-time. From this information the insurer can record all the places you are driving and have previously driven. It can reveal the types of roads you have been driving on and for how long. For example, it can record how long you have spent driving on a motorway.
The insurer may use this information to assess the types of areas you drive through and where you park. This can be useful to ascertain if you drive the car through high-risk crime areas or if you do long stints driving on motorways. This data can be useful to gauge any increase in risk to the insurer for your car getting stolen or being involved in a high-speed accident.
Using the GPS system, the insurer can see where your car is at any one time. This is particularly useful to ensure that you are parking your car overnight at the address you stated on your policy. The postcode is one of the most significant rating factors affecting your price. If the insurer notices that the car is being parked at a different location overnight on a regular basis, they may question you about it and ultimately cancel your policy.
Many telematics policies have restrictions such as no night time driving. The black box device sends data to the insurer revealing the exact time and date that your car is being driven.
Even if your policy has no driving conditions, the insurer may change your rate depending on how much driving you do at night or during times of high traffic congestion such as the morning rush hour. This may increase your risk of having an accident and the insurer will reflect this in a higher premium.
Insurance claim statistics show a high correlation between high-speed driving and an increase in accidents and personal injuries.
Therefore, monitoring your speed on specific roads together with how fast you accelerate away, gives the insurance underwriter a greater insight into the level of risk you pose. High-speed accidents can result in severe injuries to you or a third party that may cost the insurer millions of pounds.
Many telematics products reward drivers who drive carefully including the speed at which you drive, so it's in your interest to curb your speed in order to get lower insurance costs.
Being a good driver means knowing how to properly apply your brakes when needed. Many products use your braking data as part of the calculation of your overall driving score. This score is then used in generating your renewal price.
Sudden braking may indicate that you are driving too fast or you are too close to the car in front. This kind of driving style is high risk and will go against your driving score.
The black box is fitted with motion sensors that can record how well you driver around corners. Going too fast into a corner can place a large force on the vehicle which can result in either you losing control or the car tipping over. This is especially important for large sided vehicles. Again, your cornering score may form part of your overall driving score.
Many telematics policies often have mileage restrictions. Unlike a standard policy where you state your annual mileage once a year, the black box can record your mileage instantly and send the data to the insurer. This enables your insurer to send you warning notifications about reaching your mileage limits and even to charge you extra for going over your mileage quota.
It's always worth checking your policy documentation to see what fees you will be charged for extra mileage above your allocation. Conversely, doing fewer miles may result in your insurer reducing your renewal price.
In addition to recording mileage, the box will also tell the insurer how many different journeys you are making. This might be important as some policies may restrict the number of daily journeys as well as your mileage per day. If you go over the restricted number of journeys then the insurer could warn or penalise you.
All of the above data points that are captured create a profile of your driving style and are used to generate your overall driving score. This driving score is key in calculating the price of your insurance.
A good driving score shows the insurer that you are a safe risk for them to insure which can result in lower prices. Conversely, a bad driving score can be a warning sign to the insurer that you are a high-risk driver.
Bad driving scores can result in either significantly higher insurance renewal costs or the insurer may decide to not even offer you a quote.
Furthermore, it's possible that you can trigger a significant risk alert during your policy term such as excessive and continued high speed driving, breaking the speed limit or driving at times that break the terms of your policy. In these situations, insurers can cancel your policy with immediate effect. This can make getting insurance in the future very hard as you will need to declare that you have had a policy cancelled.