Telematics boxes: Big Brother is watching you drive
But hundreds of thousands of us are happy to have our driving habits scrutinised in order to hopefully save some money on our car insurance premiums.%VIRTUAL-SkimlinksPromo%
These people choose to have a little black box fitted in their cars, or use a smartphone application, that will enable their insurance company to see exactly where they go and how well they drive.
Currently offered by half a dozen providers they are also attracting the attention of the big players, with insurance giant Aviva already advertising its own version.
How do they work?
Telematics boxes are small, discreet and usually fitted for free when you take out a policy that includes one. The people that fit them come to your home or workplace, so there is no inconvenience to you.
Once installed, the box starts to record information. It can see where you have driven, looking at whether you spend a lot of time on A-roads or motorways for example, which insurance firms deem more dangerous than suburban streets. It can see when you usually drive, as night-time drivers are more prone to having accidents than those who only use their car in daylight hours.
And crucially it can see how you drive, measuring if you are speeding, or if you often accelerate or brake sharply for example.
But why on earth would you want to let someone see all of this information?
Having a black box fitted could reduce your car insurance costs. In fact for some drivers the cheapest policy for them will be one that includes a telematics box. This is particularly true for young drivers who normally face the highest premium costs.
In return the insurer knows you are likely to drive more carefully because you are being monitored, and in some cases they limit the annual mileage you are covered for.
Even better, when your policy is up for renewal the insurance firm will analyse your driving habits, and come up with a new price based on this information, which could mean you save even more money.
According to telematics box insurance provider insurethebox, significant savings can be achieved when it comes to renewal, as well as earning bonus miles for safe driving. Mark Grant, business development director, explains: "95% of our young drivers see their premiums come down after the first year – and generally by quite a lot. The average reduction is 23%, but it can be much more than that."
Insurance expert at moneysupermarket.com, Kevin Pratt, explains how this key benefit can help younger drivers distance themselves from the car insurance stereotypes. "Traditional insurance lumps people together in crude bundles, with age being a prime determining factor. So under-25s are deemed to be high risk because, according to the statistics, they generate a disproportionate amount of claims – and the claims they generate tend to be expensive to deal with. Telematics allows someone to step outside the demographic bundle and get insurance based on their own driving characteristics, not those of their peers and contemporaries."
There are other advantages to your insurance company knowing exactly where your car is, as Grant explains: "We get an alert whenever the data shows you may have had an accident. This enables us to contact you if we think you may need help and, in extreme circumstances, call out the emergency services. Plus, we can normally retrieve stolen cars rapidly because we know exactly where they are."
Sounds great, but if the box measures how well you drive, what happens if it deduces that you are neither safe nor careful?
Bad drivers beware?
Let's be honest, even careful drivers make mistakes and those who generally drive slowly break the speed limit now and again. But when you have a telematics box fitted into your car, there is no escaping how you really drive.
So what does this mean in practice?
Insurethebox claims to be realistic about the fact that people will sometimes break the speed limit – the firm looks at long-term trends rather than one-off transgressions, although there are some policies available with other providers where you are asked to pay monthly and the premiums are adjusted on a quarterly basis.
Grant insists: "We prefer the carrot to the stick. There are no penalties for bad driving, except that you are unlikely to receive many bonus miles and your record will certainly have an adverse effect on your renewal quote. We recognise that no driver is perfect and the occasional transgression should not prevent you from getting a significant reduction on renewal if you have driven safely the rest of the time."
So the biggest downside is that if you drive really badly your renewal quote may be higher for next year, and that will put some drivers off. But there is some good news - telematics firms don't share your specific driving information with other insurance companies, so you wouldn't be blacklisted across the market.
Pratt confirms: "Insurers wouldn't share data, but each firm asks for any information regarding convictions, claims, and bases their quotes on that. As a driver approaches annual renewal, they should use a comparison site to check prices and move insurer to get the best deal."
What happens if you make a claim following an accident? If the insurer can see that you were speeding for example, would they refuse to pay out even if the accident was the other party's fault.
Insurethebox's Grant claims that the black box is not used to avoid paying claims because of minor errors. He says: "The fact that you were speeding would not in itself mean that you were responsible for the accident and would be just one of many factors that we would take into account before taking a view on liability. Nor would it prevent us from paying you compensation if, for example, your car was damaged."
However, Pratt asserts that a black box can help insurers to "determine liability" in the event of an accident.
Finally it's worth pointing out that because these policies are often limited to low mileage drivers, they are not suitable, or cheap, for everyone. Insurethebox offers either a 6,000-mile or 8,000-mile comprehensive annual policy, but customers can earn up to 100 miles extra cover a month if they drive safely, or they can buy extra miles.
Clearly these policies are aimed at younger drivers who usually pay extortionate insurance premiums for the first few years, as well as older new drivers who haven't built up a no-claims history.
Insurethebox claims to be acquiring around 8,000 new customers every month, who save on average £602 on their policies.
These people clearly believe that sacrificing some of their privacy is well worth the potential saving they can make by letting an insurance company judge their driving.
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