Telematics technology is dramatically changing the auto insurance industry by enabling new product offerings, improving underwriting and offering incentive for driver safety.

Telematics are currently used for pricing insurance in a way that it rewards drivers for safe driving.

If you have a telematics based insurance policy, you are effectively sending driving data to your insurer for marking and they’ll score you based on how safe you are. By analysing when and where you drive as well as your driving style, you get a truly personalised insurance policy with premiums based on the level of risk.

If a consumer opts for a telematics car insurance policy, a black box device is fitted into the car to capture and transmit the data to the insurer and the driver/policy holder. Other options such as mobile aps and plug-ins are also available.

Black boxes capture a lot of data. Not only can they provide accurate, continuous vehicle speed and location data but also straight line acceleration, angular acceleration and deceleration data. This enables a far more complete understanding of vehicle usage which can provide many benefits; not only to the vehicle owner but also to other road users. In turn, this helps lower driver scores and insurance premiums = everyone wins!

Peter Tomkins, General Manager of the Specialty Markets division at Gallagher Bassett believes telematics could allow drivers be charged for insurance on a usage basis in the not so distant future.

“The benefits of a telematics-based insurance policy to the driver include reduced premiums for lower kilometers as well as cost savings for driving at safer times. Black boxes and the data they provide allow insurance companies to administer an incentive or reward for safe driving practices.”

Mr Tomkins believes that in addition to a transformation of the insurance industry, telematics hold a great deal of scope for other functions such as emergencies.

 “Telematics allow the tracking, monitoring and management of all important data so should a driver be in a serious accident, there is potential for this data to alert emergency services or, in the case of a breakdown, the car diagnosis could be sent to breakdown services.”

“Insurance companies are increasingly using telematics as a method of fraud prevention. So the insurance company know if accidents happen the way they have been claimed to have happened.

Work is also being done by the USA Department of Transportation to use telematics for interactivity among vehicles and infrastructure. This could allow warning systems to alert drivers of dangerous situations, traffic issues and facilitate more economical use of existing roadways.

In the way of efficiency, utility and safety, telematics is the latest enhancement to the motor vehicle industry that has a high number of benefits for both drivers and insurers.