If you have been exploring different types of car insurance policies, you may have heard the term “telematics” used. Policies that incorporate telematics are sometimes called “usage-based insurance policies,” as the price is based on the way you use your vehicle. For safe drivers, a policy that incorporates telematics can save a lot of money.
What Is Telematics?
Telematics is the collection of specific data related to your driving habits, such as your speed, braking, and cornering. Other data that might be collected includes data on the total number of miles you drive, the destinations you visit most often, and the time of day you drive. All of these factors provide the insurance company with information about your risk as a policyholder. The riskier your behavior seems the higher your premiums will be.
Insurance companies can also use telematics to collect and review important data in the event of a claim. If you are involved in a crash, for example, telematics may be used to figure out whether you were at fault.
How Is Data Collected?
If your insurance company uses telematics, you will most likely be given a device to keep in your vehicle when you drive. This device, which is most often plugged into the vehicle’s onboard diagnostic port, will keep track of a variety of different parameters. This data will be transmitted to your insurance company electronically.
How Are Insurance Companies Using Telematics Data?
Data from telematics devices can be useful for insurance companies in many ways, but the primary usage concerns the calculation of insurance premiums. Prior to the development of telematics, nearly every insurance company based the premiums they charged on demographics, including age and location. A driver’s claims and traffic ticket history were also incorporated into these calculations.
Telematics allows insurance companies to collect more accurate, individualized data about each driver’s habits. With this data, the insurance company can get a better picture of the driver’s risk level, which leads to fairer insurance premiums across the board.
Telematics in Claims Management
Car insurance companies may also use telematics data to improve the claims management process. These devices are capable of transmitting data to the car insurance company in real-time when an accident occurs, which speeds up the claims process considerably. In addition, the insurance company can often use data collected by telematics devices to understand better the conditions that led to the accident, which improves claim decisions.
Some of the major insurers that currently utilize telematics include:
The usage of telematics will likely become even more widespread in the future.
How Will Telematics Affect Policyholders?
While the use of telematics will raise premiums for some policyholders, it will lower premiums for others. For example, drivers who don’t spend much time on the road and/or drive most of the time safely will enjoy lower premiums, while drivers who don’t behave as safely on the road would see a higher premium.
The use of telematics also encourages safer driving in general. Because policyholders know that the car insurance company is monitoring their behaviors, they will not be as tempted to speed or engage in other unsafe behaviors. This leads to lower premiums, as well as a lower chance of accidents.
Having the right car insurance policy is essential. To explore policies based on telematics or to discuss your general car insurance needs, please contact Stauffer-Klug Insurance today.