Who needs Telematics Car Insurance?
Telematics car insurance refers to insurance based on how much and how you use your vehicle. According to international actuarial data and insurance business consultancy, telematics or black box car insurance will soon be a standard product offered by many insurance companies. Usage based car insurance provides a variety of pricing and marketing advantages for consumers and insurance companies alike, so it is likely that the popularity of this product will increase dramatically in the future.
One of the largest obstacles facing the advancement of telematics insurance is the lack of effective marketing. Some drivers fear the idea of telematics insurance because of the GPS technology that is used to determine the pricing. However, an innovative approach to marketing could better explain the benefits of telematics to the public, as well as calm some of their fears about the process.
Telematics-based insurance companies reward the more careful drivers, as well as those who drive at less busy times of the day. This means that insurance policies will be more specific to each person based on their individual attributes and habits, rather than based on general demographics like age and gender.
It is estimated that approximately 50 per cent of drivers in the United Kingdom would be benefit more from telematics-based insurance policies than they do from a traditional model of insurance. Canada, Israel, Japan, and South Africa are already implementing some telematics-based policies. Only the United States is currently showing signs of bringing telematics to the mass market.
If a person has concerns about a telematics-based approach to insurance, these concerns are usually centered on the privacy issues related to GPS tracking systems installed in their vehicles. However, many consumers believe that insurance companies will be able to handle the data they collect competently. Also, no person will ever be forced to buy this type of coverage if he or she is not comfortable with it.
It will most likely be more cost effective for insurance companies to ignore information about the driver's location anyway. The most important data collected by computer systems will be related to other driving behaviours like braking and acceleration that can be obtained from the on-board diagnostic port possessed by all modern vehicles.
The recent decrease in the cost of technology and data transfer has made the economics of implementing a telematics-based insurance system much more feasible. Governments all over the world view telematics in a positive way because its use will likely promote the reduction of road use, which will lead to lower pollution, less road-related injuries and deaths, and better emergency response time in the event of an accident.
Whatever insurance company breaks into the market first will likely have a huge advantage over other companies who do not yet offer this type of policy. Pay-as-you-go insurance policies are likely to appeal heavily to the elderly, who generally drive fewer miles already, as well as to young drivers that are typically charged high insurance premiums. However, telematics-based insurance policies have the potential to be beneficial to the general public as well.