Would you allow a device to monitor your driving behavior if it meant getting a discount on your insurance premiums? According to recent research conducted by Nationwide, two-thirds of consumers are on board with the idea.
The New Game-Changer in the Insurance Industry
As the competition among insurance companies intensifies, insurers are finding new ways to provide the cheapest auto insurance premiums in the market. To determine a driver’s likelihood of getting into an accident, insurance companies are slowly transitioning from relying solely on demographic information to more effective telematics systems.
Telematics devices provide real-time information on driver behavior information. Insurance companies use this data to understand their risk. By collecting data such as miles clocked and cornering speed, insurance companies can determine the risks associated with a car owner’s driving habits.
This remarkable technology could help you save a lot on insurance premiums. However, there’s still a lot of controversy surrounding these systems. For starters, there’s the issue of privacy. The telematics systems will collect all your driving information, from where you go to how long you stay there.
But, if you don’t mind insurance companies getting a hold of your data, here is how telematics devices could help you get cheaper insurance rates.
Telematics Devices Increase Your Eligibility for Low-Mileage Discounts
If you don’t usually drive long distances, a telematics device could help you save on insurance premiums. But if you suddenly get busy and start logging in more road hours, your insurance premiums could increase.
However, you can still work around this. This means joining a shorter usage-based program. Driving less often when the device is installed can also go a long way in improving your eligibility for low-mileage discounts.
Cheaper Insurance Premiums for Teens
With the telematics insurance program, teens who are good drivers could pay significantly lower insurance premiums. Insurance companies usually charge teen drivers exorbitant rates, leaving them struggling to get better deals. Usage-based insurance programs could help teens and young drivers with good driving habits get better insurance rates.
More Transparency in Determining Your Premium Rates
Statistically, younger drivers (below 25) are more likely to cause accidents than older drivers. Therefore, insurance companies consider them high-risk drivers. But isn’t it unfair to assume that all young drivers are reckless?
The same assumptions apply to people who own certain car models. Insurance companies intentionally raise premiums for people with certain cars. This is because more people have caused accidents driving these specific vehicles in the past. But why should you pay the price for others’ mistakes?
Telematics systems ignore such demographic assumptions and ensure a level playing field for determining insurance rates. These devices follow a simple logic: if you drive safely and responsibly, you’re less likely to cause an accident. And as a reward, you get lower premium rates.
That being said, if you’re a reckless driver, you might end up paying even more than the young drivers who are considered “risky.”
How Much Can You Save?
The amount you can save by enrolling in a telematics-based insurance program all comes down to the insurance company you choose. Some even offer discounts just for signing up.
In this case, the insurance company considers that you might drive more carefully since you know you’re being monitored. When you drive more carefully, you’re less likely to cause an accident. Thus, the insurance company gets fewer accident claims.
However, there are certain insurance companies out there that review your driving habits over time and adjust your premium rates accordingly. Some insurers even refund the money you’ve paid for premiums once they establish that you have good driving habits.
On average, you can save between 5% to 40% on insurance premiums. This depends on the company you choose and your driving habits. But, more importantly, you benefit more from transparency on how your insurance premiums are priced.
How Else Can You Benefit From Telematics Systems?
You Get Feedback
The data collected from telematics systems are not only for the insurance company. You also get driver feedback reports that could go a long way in helping you improve your driving habits.
Telematics systems are often connected to GPS. As such, these systems can be used to track a stolen vehicle. Besides that, some telematics systems can stop a stolen vehicle automatically or reduce its speed.
When you install a telematics system in your car, you get to enjoy tons of value-added services. These perks include automatic emergency notifications that automatically dispatch emergency services to your location when airbags are deployed.
The Bottom Line
Some people are still skeptical about how the data collected by telematics systems are used. But others are warming up to the idea and are enjoying the cost-saving benefits of the system. Your decision as to whether or not to enroll in a usage-based driving program boils down to your personal preferences.