Telematics, or pay as you go insurance, is on the rise – we take a look at how it works and the pros and cons to such policies
For drivers only using their cars once in a while, the high cost of car insurance can be pretty hard to stomach. What’s more, drivers belonging to so-called high-risk groups, such as young and elderly drivers, are often hit with hefty premiums, despite only using their cars infrequently.
A solution could come in the form of telematics insurance, which counts your miles as you drive – essentially, pay as you go insurance, or pay as you drive insurance.
Pay As You Go car insurance?
Telematics insurance technology works by having a small device, known as a ‘black box’, fitted to your car. The box then uses satellite technology to track your miles, with motorists able to monitor their driving behaviour online.
The telematics box also tracks things like acceleration, braking, cornering, and journey time, enabling insurers to take these factors into account when working out the cost of premiums.
Normally, drivers are charged a set amount per year and allowed to drive a certain number of miles before being charged extra. Insurers such as Coverbox and Insurethebox allow you to top up in bundles of 250, 500 or 1,000 miles which you can roll over to the following year if unused.
Who benefits from telematics?
With statistics showing that young drivers are more likely to have accidents and make insurance claims than any other age group, drivers under the age of 25 are likely to benefit most from pay-as-you-drive policies.
Out latest research puts average premiums for male drivers aged 17 to 18 at more than £2,100 – paying only for the miles you drive could help young and new car owners control that spiralling cost.
Drivers using their cars outside of peak traffic hours could also save, as some insurers charge less for miles driven when the roads are emptier and accidents less likely.
Advantages to telematics insurance
The advantages of telematics insurance or pay as you go car insurance are clear. Put simply, the less you drive – and the safer your driving – the more you stand to save on insurance.
Also, as cars spend less time on the road, the number of accidents decreases – the car insurance industry has stated that telematics insurance products cut accident rates by about 20%.
Pay as you go car insurance could have a positive impact on the environment, with people more likely to ditch their cars in favour of public transport if they knew their premiums could go up if they were to exceed a certain number of miles.
The black box also acts as a tracking device, meaning that stolen cars can be traced easily.
Disadvantages to telematics insurance
A number of factors, such as moving house or job, have the potential to impact the amount of miles you drive each week, while the idea that you might be penalised for absent-mindedly exceeding the speed limit could make drivers nervous.
Black box devices are also unable to tell the difference between drivers, meaning that if various people are all using the same car, they could all be charged at the same rate as the most expensive driver.