While telematics is a new concept for many consumers, it has been used in fleet and commercial auto insurance for years. Because of the benefits in these industries, telematics has been extended to consumer auto insurance in recent years, too.
What is Telematics?
Telematics refers to the use of telecommunications (methods of data transmission) and information (data collection and analysis) to customize auto insurance rates based on risk.
How do Telematics Work?
Not all insurers offer a telematics program, and not all drivers elect to participate in telematics programs. If your insurer offers it and you choose to participate, here’s what you can expect.
First, your insurer will provide you with a device. You’ll plug it into the OBD-II port (the one used to run vehicle diagnostics), and it will begin collecting information about the way you drive. Information collected varies a little but usually includes how often you speed, how often you brake hard or turn sharp, and basic information about where, when, and how much you drive your vehicle. It will also record information before, during, and after an accident, like identifying information about the other vehicle involved, if applicable, and the likelihood that someone was hurt in the accident.
All of this information is readily accessible by your insurance company.
Who is Using Telematics?
Many major insurers use telematics including Safeco, Nationwide, Progressive, and Travelers, to name a few. Ask your agent if your insurance company offers a telematics program.
How is Telematics Used?
First, telematics is used to keep insurance premiums low for responsible drivers. Before technological advances in telematics, driver risk was estimated based on their demographics: age, gender, marital status, and credit score, for example. This method works quite well for insurance companies but leaves responsible drivers paying for the increased risk that irresponsible drivers pose to the insurer. Telematics helps you pay the premium that fits your risk level.
Second, it helps insurance companies identify the highest risk drivers, so they have the opportunity to decide whether to insure them or not. By excluding high-risk drivers (or charging them higher premiums), insurers can help prevent high claims and high premiums for other drivers.
Finally, it helps ensure you get the coverage you need following an accident by providing information that can be helpful in real-time, such as the events leading up to the accident, the identity of any other vehicle that makes contact, and the likelihood that anybody was hurt based on the severity of the accident. This can both prevent insurance fraud and help you prove your case if the other driver was at fault or left the scene of an accident.
Why is Telematics Used?
Simply put, telematics makes car insurance fair and affordable for the consumer, making it a win-win for both insurers and consumers.
To find out if you can lower your car insurance premiums by participating in a telematics program, contact the team at Feldbruegge Insurance today. Keeping your rates low and your coverage high is our primary goal.