If you have been researching different car insurance options, you may have heard the term “telematics.” This new technology allows car insurance companies to set more equitable premiums based on the driving behaviors of specific clients. To learn more about telematics and how it could impact your policy, consult the information below.
Telematics involves the use of technology to track driving habits. The insurance company may use the information available from telematics in several different ways.
If your car insurance policy includes the use of telematics, you may be given a black box or plug–in device to place in your vehicle, or you may be asked to install a specific application on your phone. The device or application will keep track of important information about your driving habits, including:
- Total miles driven
- Times spent on the road
- Times of day or night spent operating your vehicle
- Speeds traveled
- Most frequent destinations
Not all major car insurance companies utilize telematics. However, several major insurers have already begun to offer policies that include telematics. Some of these insurers include Travelers, Nationwide, Safeco, and Progressive.
How Do Insurance Companies Use Telematics?
Insurance companies use telematics in a variety of ways. The main way insurance companies use telematics is in the determination of insurance premiums. Telematics devices or applications collect detailed data about the way you drive, which is then used to determine your level of risk to the insurance company. The higher your risk, the higher your premiums will be. Data collected by telematics devices or applications includes:
- Speed you drive
- Times of day you typically drive
- Destinations you visit
- Braking habits
- Number of miles driven
If you are involved in an accident, the insurance company may also use the data collected through telematics in the processing of the claim. The telematics app or device will inform the insurance company as soon as the accident occurs. The insurance company will also be able to use the data collected to understand the cause of the accident and make decisions related to the claim.
Why Are Insurance Companies Moving to Telematics?
In the past, most insurance companies determined premiums based on the average risk posed by drivers with certain characteristics. However, telematics devices can be used to calculate premiums fairer for all drivers. Rather than basing the cost of insurance on demographics, the cost of insurance is actually based on the way the individual drives.
In addition, telematics is beneficial to insurance companies because it gives them extra information about any accidents that occur, ensuring that they are able to make the right decision on claims.
Should You Get a Policy with Telematics?
If you are a relatively safe driver, you may have a lower premium if you opt for a policy that includes telematics. You may also have more incentive to drive safer, since you will know that your habits are being monitored. To learn more about an insurance policy based on telematics, please contact Brian Van De Hey Insurance today.