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Telematics. The new buzzword in car insurance. Even if you haven’t heard of it yet, it’s probably going to become a regular part of your vocabulary in the near future. So what is all the hype about with this new technology? Well, let’s take a minute and dive in and take a look at Telematics, specifically with how it relates to car insurance.

7 Things You Need to Know About Telematic Car Insurance.

1. What it Is.

Never heard of Telematics Car Insurance? Well then that is a good first step. Simply put, telematics is a technology that allows car insurance companies to collect data on their customers’ driving habits. If they find that their customer has good driving habits, they will lower their insurance rates. (Note: most companies that currently offer telematic car insurance say that they will only use this data to give you lower rates for good driving habits, not higher rates for unsafe driving habits).

2. It’s Easier Than it Sounds.

The word telematic sounds all complicated and techy. But really, it’s just a fancy way of saying that the company collects data and then rates you on it. I’m sure the technology behind telematics is pretty advanced, but it’s not very complicated in how drivers and car insurance companies use it.

Telematic car insurance (sometimes also referred to as “black box” insurance) rates each driver on their driving habits. They collect this data in one of two ways:

  • They provide the driver with a telematic device that the driver plugs into their car’s diagnostic port. The driver either sends the insurance company the data through their computer, or they send the device back to the company.

-Or-

  • The driver syncs their smartphone, Bluetooth, and Internet connection to collect and send the data.

Once the insurance company receives the data on the customer’s driving habits, they analyze the risk of that particular driver (based on the data they collected), and then gives them discounts accordingly.

3. It Pays to Drive Safe.

If you are a safe driver, then Telematic car insurance can save you money. And it has the potential to be a lot of money that you can save. With telematics, insurance companies monitor things like average speed, braking habits, how fast you go around corners, the time of day you are driving, etc. If you are considered a “safe driver,” then they will reward you with discounts.

DriveFactor, a telematics company, has said that telematic policyholders could save up to 50 percent on their car insurance. That is a whole lot of money!

4. It Is Meant For Good Drivers, But it Could Also Help Bad Drivers.

Telematic car insurance has obvious benefits for good drivers (who doesn’t like a good discount?). But it can also help bad drivers! As more drivers want to become eligible for these pretty high good driver discounts, the hope is that they will improve their driving habits. The hope also is that, as some of these less-safe drivers receive their reports back and are able to see just had bad their driving habits are, they will naturally want to become a better driver just for their own and their family’s safety. Sometimes cold hard facts are a better motivator than your spouse telling you to slow down.

A study done by Norwich Union (now known as Aviva) concluded that 20% of road accidents could be reduced through telematics insurance. If this is true, that means we all benefit. Whether they’re motivated by the numbers, or the dollars, as bad drivers improve their habits, that makes our roads safer in general.

5. It Could Help You Find Your Car.

Most telematic systems include GPS capabilities. That means that it could help to locate your car in case of theft, accident, or breakdown. If your car is stolen, the telematics device can help find it. If you are in an accident, or you breakdown, it can help them pinpoint exactly where you are. That is a great added benefit! I can see police and other emergency response personnel finding great value in this feature.

6. It Isn’t A Perfect Science.

Just like with pretty much all other technologies, it just isn’t perfect. It’s not necessarily always 100% accurate in its conclusions. For instance, some systems may not be able to distinguish between highway, city, or rural driving. Telematic systems can’t tell if a driver changes lanes abruptly, puts on their makeup while driving, or just doesn’t pay attention in general. Many times the data can still come out that they are a bad driver (like if they brake abruptly while doing these things). But it definitely cannot catch all bad driving habits.

7. Who Offers It.

If you are interested in telematic car insurance, it is good to know where you can get it. Most of the more popular insurance companies, as well as many smaller companies, have launched usage-based insurance programs. None of these replace their current more traditional offerings, but they are used as additional programs you can opt-in to in order to try to receive additional discounts.

A few to look into:
Progressive’s “Snapshot” program
Liberty Mutual’s “Onboard Advisor” program
State Farm’s “Drive Safe & Save” program
GMAC’s “Low Mileage Discount” program
Allstate’s “Drive Wise” program (not launched yet, currently being tested)

Your current insurance provider may also already have a usage-based program available. If you are interested in the program with your current provider, go to their website and look around for a minute, you may see some content popping up about it. It also isn’t a bad idea to give them a call and see if they offer something like this. If they do, great, you can get more information about it. If they don’t they may be able to help you find some other ways in which you can receive discounts with them.

Conclusion

Most insurance companies today either already offer some sort of usage-based car insurance, or they are currently working on providing these type of offerings. Currently all of these programs are optional programs. You chose whether or not to opt-in to this type of program. But, as these types of programs continue to grow, and as insurance companies continue to save money with lower-risk drivers, you may see the “optional” status begin to change.

If you have car insurance you should be aware of what telematic car insurance is and how it works. Whether you like the idea of telematic car insurance or not, it definitely isn’t going anywhere. It just may be the future of car insurance, so understanding it will help you make more informed choices now, and as these programs continue to expand and evolve.

Nicole covers the cheap car insurance section at CheapInsurance.com.