By now, you’ve probably heard of insurance telematics - sometimes called usage-based insurance. And you may have heard tantalizing tales of being able to lower your insurance rates.
So what is telematics, and how can it help you get a better deal on your insurance premium? Learn more in this blog post.
What is Insurance Telematics?
In the insurance world, telematics refers to an app or device that tracks your actual driving habits. Insurance companies collect the data and use it to determine how much you’ll pay.
It might sound a little creepy - so why would anyone want to use it?
“You personally can control the savings you have based on how well you drive,” said Stephanie WInegardner, senior account advisor at Block Insurance.
That’s because traditional insurance models are based on predictions and historical calculations - not on your true driving habits. Telematics gives companies an honest look at how you’re doing in the car, and if you’re a good driver, you’ll be rewarded.
Parents of teens may also like being able to see exactly how their new driver is doing.
“It can help with teen driving for parents to be able to communicate with their teens why it’s important and parents can see through these apps how their driver is actually performing,” she said.
Can Telematics Make Me Pay More?
Although companies tout the benefits of telematics for responsible drivers, it’s possible that less-than-stellar driving habits and driving more actual miles than reported could cause your rates to go up
Winegardner said it depends on the company. One carrier, for example, only tracks drivers for the first four months, then uses that data to set their premium going forward. Others track and monitor driving history throughout the time the person is insured.
“We just had an insured who got a 26 percent discount on her premium after her first six months (using a telematics device),” Winegardner said. “So for the next six months, we’re curious to watch that discount and see if it goes up further.”
What Counts as “Good” or “Bad” Driving?
Besides potentially saving you money, Winegardner says another benefit of opting into a telematics program is the chance to become a better driver. She and another agent are currently trying out telematics programs on their own insurance policies to learn more about how they work .
“It’s informative - it tells you right where you did a particular driving behavior,” she said. “It gives you examples of what you can change in your driving habits to correct that. It just makes us more mindful.”
Some studies have shown that crash rates fell up to one-third in cars with telematics devices. Follow some common-sense rules if you’re driving with a telematics device to make sure you aren’t getting penalized: Hard braking, harsh acceleration and taking round-about routes are all frowned upon.
So, Should I Start Using a Telematics Device?
As with any insurance decision, you should weigh the pros and cons before making a change.
For most good drivers, telematics can be a chance to get rewarded for your efforts. But if you aren’t the greatest behind the wheel, there’s a possibility of being penalized.
Remember, also, that the telematics device or app collects personal data about you. Are you OK with that? Be sure you’re comfortable with exactly what data is collected and how it’s stored.
Finally, be sure to talk the decision over with your agent. He or she can help you see what options your current carrier offers and if the benefits would be worth it for you.
Get the Latest Insurance News and Info
We work hard to understand the tricky parts of insurance so you don’t have to. Curious about life insurance or contemplating switching car insurance carriers? We can help.
Visit our blog to learn more about all things insurance - plus some light-hearted fun. Don't forget to subscribe to be the first to know about the news and stories we cover.