A myriad of auto insurance companies uses telematics to reduce risk, encourage safe driving habits, and keep your insurance rates low. Here’s everything you need to know about telematics and car insurance.
What is Telematics?
Telematics is a combination of two sciences (telecommunications and informatics) used by the auto insurance industry. A device placed in your vehicle collects data that’s meaningful to the insurer. It then transmits that information in real-time, equipping insurers to make informed decisions about coverage and premiums.
How Does Telematics Work?
If you elect to participate in your insurer’s telematics program, you’ll plug a device – provided by the insurance company – into a specific port on your vehicle. Once the device is placed, it simply begins observing and transmitting data:
- which geographical areas you drive in most often
- how many miles you put on per day
- how often you exceed a certain speed threshold
- how frequently you brake hard or turn sharply
- what times of day you commute
It will also collect information before and during an accident: information about other vehicles involved, damage incurred, and the likelihood of injury based on impact and other factors. This information is used for better and more timely accident investigation.
Who is Using Telematics?
Nationwide, Safeco, Progressive, and Travelers are just a few of the insurers who offer a telematics program today. Your insurance agent can help you find the right program with the right insurer.
How is Telematics Used?
The data is used in several ways. Right now, your insurance premium is based on the level of risk other people who are your age and gender, for example, pose to the company using historical data. Hardly seems fair, right? Telematics changes that. While your initial premium will be calculated based on statistical information, your insurer will have enough information by your first renewal to calculate rates based on your driving behaviors. That means that you’ll never have to pay the price for other, higher-risk drivers like you might be doing today.
Second, telematics provides information about an accident that can be hard to prove otherwise. For example, if the other driver was at fault and left the scene of the accident, the information recorded by your telematics device can help you identify the other vehicle involved. Likewise, if you are at fault and another driver is claiming serious bodily injury, telematics data can help determine whether that level of injury was likely based on the circumstances surrounding the crash.
Finally, insurance companies may use telematics to determine which drivers are too risky to cover and terminate policies earlier. This is beneficial to you because high claims can drive up costs for insurance companies, and subsequently, drivers.
Why is Telematics Used?
In as few words as possible, telematics distribute cost fairly based on risk. They benefit the responsible driver.