Telematics or black box insurance policies use telematics technology to monitor your driving behaviour by using an in-car data recorder. Telematics or pay how you drive’ insurance can help you to lower your car insurance premiums. The insurance policy involves fixing a black box device in your car. The black box records data and sends it to your insurer. Many insurers in the UK and US are increasingly offering telematics insurance schemes. The scheme relies on the black box device to record data and analyse it before transmitting it through a telecommunication system to the insurer.

While some drivers are focusing on reducing their insurance premiums by reducing the distances they travel per year, others are focusing on their driving behaviour. Telematics insurance focuses on aspects such as braking and cornering. The small black box, which is approximately the size of a smartphone, records your driving style in terms of distance travelled, speed and the time of travel-night or day. In addition, the black box builds a comprehensive profile of the driver by recording the type of roads he/she typically uses. The insurance premiums you pay to the insurer depend on the data analysed by the black box.

Telematics insurance offers numerous benefits to all drivers;

· This type of insurance gets rid of unfair insurance practices which require both good and bad drivers to pay the same insurance premiums. Under this scheme, good drivers are not overcharged since the premiums are based on your driving habits as opposed to your driving experience or general statistical evidence. In this light, newly qualified or young drivers can pay cheaper premiums since the premiums are based on the actual driving behaviour instead of statistics.

· Telematics insurance is encouraging good driving behaviour among drivers since it is rewarding to drive safely.

· Black box insurance is also beneficial in that insurers will alert police and ambulance services if you are involved in an accident.

Since this scheme uses a black box to show location of the cars, many drivers are concerned about their privacy. However, insurance companies can disable location tracking to enhance your privacy. Given that this scheme allows customers to determine their premiums, many drivers are adopting it to enjoy the personal approach it offers. Black box insurance continues to appeal to many drivers especially because insurance costs are increasing day by day. It is vital to engage in telematics insurance. However, you should know what type of data is collected and how the premiums are calculated based on this data.

How it Works

A black box works by recording data and reporting it to the insurer who determine the premiums you should pay. For lower premiums, a driver should drive safely. If you decide to take telematics insurance cover, the insurance company will fit a black box in your car. Many insurers who offer telematics insurance policies have trained and experienced installers who fit the black box behind your car’s dashboard. Typically, the box is fixed at no extra cost and it does not interfere or affect how your car works. The black box does not only monitor your location but also how you handle the car. The device analyses different aspects of driving such as acceleration, braking, speed, timing and cornering.

The black box can help the insurance firm to determine whether a driver is stuck in traffic or whether the driver uses the highway on a regular basis. This type of insurance makes driving an exciting activity since you can access your driving history on a secure website. The website also outlines how the insurance firm is using the data to determine or calculate your insurance premiums. The website also shows you whether you need to alter your driving behaviour. Additionally, it provides important tips on how you can lower the cost of your insurance policy and how you can achieve a good driving score.

You can achieve a good driver rating by changing your driving style depending on the information displayed on the dashboard. The black box gives accurate ratings and assessment which you can use to reduce your premiums. Another major advantage of telematics insurance is that it is easy to locate your stolen car given that the black box device transmits data about the location of your car to the insurance firm.

The term black box was adapted from the device used on aeroplanes. The black box fitted on airplanes records any system changes, problems and communication coming from the cockpit. Aircraft examiners and investigators use this device to determine what caused an accident. The black box on your car works almost similarly like that used on aeroplanes.

In general, you can lower your premiums by driving fewer miles, driving during the day and driving on roads that are less dangerous. You can also get maximum discount by driving at appropriate speeds, taking breaks on long trips, and reducing harsh breaking and rapid acceleration. In a telematics insurance scheme, premiums are paid on a monthly basis. This means that the insurance firm can adjust the premiums to reward drivers who drive safely and punish those who are reckless.

How Premiums are Calculated

Black box insurance helps drivers save on premiums if they drive safely. Normal insurance policies have numerous biases that can lead to overcharging. With normal insurance policies, insurers use the following factors to determine premiums;

· Your age

· Your job

· Your car

Normal insurance policies do not consider your driving style or behaviour. They do not consider how safe you drive. As such, you may end up paying higher premiums. Under the telematics scheme, the insurance firm calculates premiums depending on how you avoid dangerous driving conditions. Insurers offering telematics insurance consider the following factors;

· Miles

Telematics insurance providers set a distance limit every month. If you exceed this limit, they charge you extra fees. However, drivers with good ratings can get a discount from insurers if they exceed the limit set. If you drive at night or dangerously, insurers can reduce your limit. However, you can pay premiums based on the distance you cover. If you opt for this option, the insurer does not set a limit which you should not exceed.

· Accident Service

The data recorded in a black box can help you if you face an accident-related lawsuit. This is due to the fact that the box provides vital information regarding how you were driving and the location. If you are involved in an accident, your insurer may contact the police and ambulance services. These services may affect your premiums.


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