You’ve probably heard the term telematics, but do you know what it is? It might seem like the latest buzzword in insurance, but it’s much more than a trend. In this article, we will dig into how telematics is used in the insurance industry and why are so many people choose to use it.
Telematics is “the technology of sending, receiving, and storing information using telecommunication devices.” The business sector has used it for years to control and monitor remote objects like cars, trucks, trailers, and containers.
Telematics Meets Insurance
According to AutomotiveWorld.com, insurance companies began using telematics in early 2000. In 2007, the first commercial launch of a PAYD (pay as you drive) policy took place. One year later, in 2008, UBI (usage-based insurance) was introduced in the insurance industry. Since then, the use of telematics to drive and shape insurance costs has emerged.
Today, telematics-powered auto insurance is a form of policy in which an insurance company uses in-car tracking devices to monitor a driver’s habits. A mobile app records vehicle speeds, mileage, total drive time, and other factors. The data is then utilized to determine the policyholder’s auto insurance premium. It’s common practice for data to be collected for one standard six-month policy period before it is used to revise the insurance premium.
The Pros and Cons of Telematic Auto Insurance
More and more people are using telematics because of its potential benefits and cost savings. The pros include:
- A considerable discount potential
- Rewards for being a good driver
- Insights to improve driving habits
Usage-based plans have the potential to partially bypass non-driving factors that can impact your insurance premium, such as your credit score or location. The safer you drive, the greater the potential for discounts.
There can be drawbacks to telematic auto policies to consider:
- Long commutes or drive times could disqualify the policy from discounts
- Discounts can fluctuate based on driving habits
- Driving at night could trigger higher-than-expected rates
- Some programs raise the policy premium if the data collected indicates the driver is a “bad” or high-risk driver
- Mobile apps cannot tell if you are the driver or passenger, so if you’re the passenger, you might need to dispute the data
Why People Use Telematics
The potential cost savings is the biggest reason people try telematics. Most insurance companies offer an instant discount for enrolling in their telematics program. Customers who tick the boxes of being safe, low-risk drivers receive greater discounts based on their driving data. Telematics can also be helpful for young drivers. It can promote safe driving habits and provide information on areas for improvement.
The choice to opt into a telematics program is yours. It isn’t required, but it can be beneficial. The Internet is full of opinions about telematics that have created misinformation. We’ve debunked the top five telematics myths, so follow the link for a quick read.
Our trusted advisors are ready to help you weigh the pros and cons of using a telematics program. Let’s look closely at your needs to see if it fits you best. Contact firstname.lastname@example.org or call us at 757-416-5109.