Telematics is relatively new in the field of car insurance, but it is changing many things about the way premiums are calculated. Insurance companies that use telematics to calculate their premiums can provide fairer prices that are based on the individual driver’s habits, as opposed to their demographic. Insurance companies can also use telematics to improve the processing of claims.
Telematics is a type of technology that allows your insurance company to collect specific data about the way you drive your car. Some of the data that may be collected through telematics includes:
- Your speed
- Number of miles driven
- Typical destinations
- Time of day or night most often spent driving
- Braking habits
This data can be used to determine how much of a risk you pose to the insurance company based on your likelihood of being involved in an accident or having another type of claim.
How Does it Work?
Most insurance companies that utilize telematics will ask drivers to place a telematics device in their vehicle. In most cases, this device will plug into a specific port in your car. The telematics device collects all of the data the insurance company uses to calculate your premiums and/or process any claims made.
When determining your insurance premiums based on telematics data, car insurance companies typically use the information they have collected to calculate your risk compared to other drivers. If you frequently drive at high speeds or your braking habits are worrisome, your premium may be higher than average. However, if you drive safely, your premiums will be lower. Premiums are also lower for drivers who don’t spend much time on the road.
If you are involved in an accident with a telematics device in your car, the device can inform your insurance company of the accident immediately, which speeds the processing of your claim.
Why Are Insurance Companies Using Telematics?
Without telematics, insurance premiums are usually calculated based mostly on the driver’s demographics, including their age and location. Although demographics can give the insurance company an idea of the driver’s risk level, telematics provides much more detail and accuracy. When insurance companies use telematics instead of demographics alone, they can ensure that the riskiest drivers are paying the highest premiums. Also, because telematics rewards drivers for safety, insurance companies can also encourage their drivers to be more responsible on the road, which leads to fewer accidents and fewer claims.
Does Telematics Help or Hurt Policyholders?
Telematics may raise or lower a policyholder’s premiums, depending on the situation. Because telematics rewards safe driving, it is usually most beneficial for policyholders who drive carefully.
At this time, drivers can still find plenty of car insurance options that don’t involve telematics. However, several major insurers are already offering policies based on telematics, and more insurance providers will likely follow suit in the future. Insurance companies that are already using telematics to calculate premiums include Progressive, Travelers, Nationwide, and Safeco.
Exploring Your Car Insurance Options
As a driver in the Phoenix area, you have many different options available when it comes to car insurance policies. For this reason, it is important to explore all of your options carefully before making a choice. At Smartmove Insurance, we are happy to help you review all available policies and select the best one. Contact us today to get started.