Satellite based GPS systems can track objects on earth with extreme accuracy, and in conjunction with information technology and telecommunications, has been adapted to develop Telematics - the remote collection of data - and used very successfully for several years in a number of industries.
The insurance industry has taken notice of the benefits of Telematics technology in these industries, in particular in cargo and fleet management, where every vehicle can be tracked and cargo monitored en route to its destination.Employees can be scrutinised for poor driving behaviour and help can be quickly sent to the scene of an accident.
Very recently, insurers started to offer motor insurance based on this technology, and although currently only four insurance companies offer such schemes, many more are planning to do so. Commonly known as Usage Based Insurance (UBI) the insurance premium is based on individual driver behaviour rather than general statistics, the policies allow good, experienced and low mileage drivers to benefit from their patience and restraint on the road and penalise those who present more of a risk.
The essential idea is that drivers pay a premium comprising a small annual charge, plus an amount relating to their predicted usage according to the miles they travel and the times of day they use the roads.Daily driving during the rush hours is more expensive per mile than at quieter times and mileage is calculated continually with discrepancies either refunded or added during the term or at renewal.
Targeted at high risk groups of drivers, Telematic insurance offers the benefit of reduced premiums in exchange for a limit on their hours of cover at a given price. 40% of serious and fatal accidents happen between 11pm and 5am and very often involve young drivers, so young and inexperienced drivers are restricted at night and are rewarded for low mileage. That is not to say they are not insured at night, but if the vehicle moves, a large penalty is payable. Although irritating to a new driver, the benefits include reduced road deaths of young men in particular and relief for many parents.
In contrast, drivers whose behaviour conforms to the insurance company's idea of "safe" driving are also able to take advantage of the low premiums.So someone who travels to work by train and only uses their vehicle at weekends can dramatically reduce their insurance costs.
Most insurance companies also track stolen vehicles, and claim this allows them to recover most vehicles within an hour of a customer’s notification. More comprehensive schemes on the market consider speed and braking behaviour, automatically track when a vehicle has been involved in an accident, and can assess the cause and determine liability.
On renewal, driver behaviour can be taken into account and the premium will reflect this. It is perhaps a moot point that slower and less frequent drivers are safer drivers, as awareness, regular experience and other factors can affect the likelihood of an accident, but with the EU dictating that gender can no longer be a criterium in risk assessment, it is useful and perhaps fairer to have a tracking system to establish a driver’s individual behaviour and to charge them accordingly.