What Are Telematics?

The terminology itself is an adopted term to describe all technology associated with tracking and communicating driving data. Insurance companies will take this data, and either offer you a personalized rate based on how you drive, or simply give a solid discount.

You’ve probably heard of various insurance companies offering a plug-in device for your car; lately these companies are adding a phone app to also track your driving. These devices all monitor various driving habits such as miles driven, time of day, hard braking, quick acceleration, etc. This is what we call “usage-based insurance” or UBI.

UBI consists of two types of rated insurance based on your driving data: “pay as you drive”, and “pay how you drive”. These are pretty self explanatory. Pay-as-you-drive telematics measures the distance you typically drive. This driving data measures how much and how often you’re driving. Pay-how-you-drive means that your driving habits, rather than pure distance, is measured.

So why should you consider rating your insurance based on telematics?

Traditionally insurance is rated based on historical data collected from the previous year. This doesn’t take into account certain years, or time periods, where you would be driving infrequently. You also may want to consider that if you are a low-risk driver, you could get a lower premium on your insurance. Telematics also accurately record accident damage; so if you find that you need your insurance, it may be helpful to have them already know what has happened. However, we know that this does bring up certain privacy concerns. This has led to some states writing legislation that requires insurance carriers to disclose the data they collect. In effect, this has caused these carriers to collect less driving data.

When you’re looking to lower your premium…

Adding telematics can be the easiest change to make without making a dent in your coverage. Many people have left the roads and their commutes this year. With the advent of working from home, or the unfortunate job loss due to Covid-19, many are looking to reduce their premium as much as possible. Why pay so much for insurance when you’ve reduced the chances you’ll need it? Various carriers, such as Nationwide, are offering variable rates based solely on how much you drive. So if you’re unsure of sharing your driving data, but want this variable rate, this may be a good fit for you.

If you’re looking to save money on your auto insurance this year, and telematics sound like a great idea, reach out to us and one of our knowledgeable agents will be happy to assist you.

Resources:

Telematics/Usage-Based Insurance – National Association of Insurance Commissioners

Background on Pay As You Drive Insurance – Insurance Information Institute