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Does black box car insurance lower the cost of cover?

The AA has announced plans to introduce a ‘black box’ car insurance policy, but what exactly are they and how do they work?

The scheme is not the first of its kind – the Co-operative announced its own version last year and several smaller insurance companies have been providing the service for sometime now.

Following backing from David Cameron this week, who has called for ‘telematics’ – technology which integrates the use of telecommunications – to be rolled out more widely across the industry, it looks like ‘black box’ insurance policies could become more widespread.

How does it actually work?

The black box device itself is fitted beneath the bonnet of your car and monitors how you drive, taking into account speed, cornering force, braking and road types.

By monitoring your driving, car insurance companies are able to recalculate your premiums based on how you’ve driven over a certain period of time.

Therefore, instead of paying a set quoted price for a year’s coverage, your premium will be recalculated after an agreed period of time. If you have driven carefully you’ll be reimbursed a percentage of your premium. However, if you have driven recklessly you could be charged more.

Who will benefit the most?

These types of policies are predominantly aimed at young drivers, as statistically they’re more likely to have an accident and therefore pay higher premiums.

Currently, the average standard premium for a male aged 17-22 is £3,163 – it’s just £1,799 for a female of the same age.

The Co-op expects young drivers aged 17-25 to receive a reduction of more than £500 on their initial premiums in return for having the device fitted in their cars, while the AA believes it could be as much as £850 a year.

Other ways to save on car insurance

If you don’t like the idea of having your driving habits monitored, there are several other ways to reduce your car insurance premium:

  • Choose to pay a higher excess (the amount you pay towards each claim)
  • Limit who drives your car to you, or you plus a named driver
  • Park your car in a garage or off the street
  • Keep your mileage low (doing under 12,000 miles a year)
  • Fit a security device such as an alarm or immobiliser