Until the introduction of telematics, all drivers were responsible for one bad driver. That is, the average driving habits of all clients insured by an auto company was used to predict the driving habits of each client. For many companies, telematics has changed that.
What is Telematics?
Telematics technology is placed in your car to collect data about the way you drive. This innovative technology helps insurance companies make decisions about your policy and rates based on you rather than regional or national averages. For responsible drivers, telematics can keep their rates low and prevent them from carrying the burden, so to speak, of less reliable drivers insured by the same insurer.
How Does Telematics Work?
The insurance company provides an auto insurance client with an electronic device that plugs into the vehicle’s diagnostic port, called the OBD-II port. From there, it monitors important factors about your driving habits:
- how much you drive: how much time you spend on the road and how many miles you drive per day
- what time of day you do the most driving: rush hour, quiet times, etc.
- how you accelerate
- how you brake; telematics often record incidents in which you slam on the breaks
- how often you exceed a certain speed (usually 80 mph)
The data is collected and shared with your insurance company.
Who is Using Telematics?
Many major auto insurers are using telematics to make more informed decisions about risk and rates, including Progressive, Travelers, Safeco, and Nationwide.
How is Telematics Used?
The data collected and transmitted from a telematics device is used by the insurance company in more ways than one. They’ll use the data to price insurance for individual drivers; drivers with high-risk behaviors will pay more for their insurance than safe drivers.
Additionally, telematics can be used to gauge risk. Drivers who do most of their driving during rush hour in a congested city may pose more risk than drivers who commute during off-times in the suburbs. Telematics are also helpful when it comes to claims management; the data from a telematics device can help the insurance company learn more about the events leading up to, during, and immediately following an accident. Some of the information used in these scenarios is:
- the location of any damage to the vehicle and the extent of that damage
- the probability that bodily injury occurred as a result of the accident
- which other car was involved in the accident
Insurance companies that use telematics devices often have all of this information before the insured ever files a claim, which gives them a head start on the investigation process and the ability to manage the claim proactively.
Why is Telematics Used?
Telematics allows insurance companies to calculate risk and rates based on the individual driver rather than the average of all drivers “like” them – that is, the same age, gender, marital status, and credit score, for example. This customized approach can help keep insurance premiums low for low-risk drivers and help insurance companies prevent costly losses.
To explore using telematics to save on your premiums, contact Vanyo Insurance Group in Scottsdale, Arizona, today.
