Although you may be unfamiliar with the term telematics, there is a good chance you’re more familiar with the concept than you think. Telematics refers to the marriage of telecommunications and informatics, and while telematics is used in several industries, they are best known for their role in the auto insurance industry.
What is Telematics?
Have you seen auto insurance commercials advertising the ability to use a tracking device to get lower rates on car insurance or to incentivize safe driving among teens? These devices are used for telematics: collecting data (informatics) and then communicating that data back to the insurance company (telecommunication) in real-time.
While not all insurance companies have deployed telematics, many have done so with great success, allowing responsible drivers to keep their rates low and identifying high-risk drivers early to prevent substantial losses.
How Does Telematics Work?
If you elect to work with an insurer who offers telematics, you’ll be provided with an electronic device that you plug into your vehicles OBD-II port (the same port you use to run diagnostics on the vehicle). Once deployed, the device simply observes, records, and shares information about the way you drive.
Examples of the kind of information it’s monitoring include how sharp you turn corners, how often you speed, how often and how far you drive, when and where you do most of your driving, and how often you slam on the breaks, to name a few. Additionally, telematics can record vital information during a car accident, including the likelihood that someone would be hurt in the accident and information about the other vehicle involved, if applicable.
Your insurance company can access the data in real-time.
Who is Using Telematics?
Telematics is becoming more and more common among auto insurance companies. Some of the household names using telematics include Travelers, Progressive, Nationwide, and Safeco.
How is Telematics Used?
If you are like most consumers, you’re wondering how the insurance company uses the data collected by a telematics devise. Insurance companies use the data for two primary purposes: 1) to gauge your risk, and 2) to investigate and respond to claims.
Gauging Your Risk
Gauging your risk before extending auto insurance to you is important for two reasons:
- It allows insurance companies to price insurance based on each individual driver instead of their demographic group. For example, a 22-year-old male is considered a very high-risk driver and typically has expensive insurance premiums because of that. However, a telematics device will help set apart the responsible, low risk 22-year-old male drivers, keeping their premiums low despite the risky behaviors of their peers. Even if you are not in a high-risk category, your city might be a high-risk area; again, telematics can help you keep your rates low if you’re a responsible driver of a high-risk town.
- It helps insurance companies keep costs low. Sometimes, a driver is so reckless that it is too risky to provide continuing insurance. Before telematics, insurance companies did not recognize risky behaviors until a loss resulted, and in many cases, the loss was major. Telematics can help insurance companies understand drivers whose policies should not be renewed to mitigate risk of loss.
Investigating and Responding to Claims
Claims investigations sometimes become a “he said, she said” situation in which neither insurance company is able to identify the facts surrounding the accident. This can leave an innocent driver liable for damages that occurred as a result of another driver’s recklessness.
By gathering data in real-time and alerting the insurance company to an accident as soon as it happens, telematics devices achieve several goals:
- They allow the insurance company to respond sooner, which might improve the likelihood of gathering accurate information from witnesses.
- They provide factual information about the events leading up to, during, and immediately following the accident, like the location of damage, the extent of vehicle damage, and the likelihood that an injury could have occurred.
This often provides better protection for drivers who find themselves victim to someone else’s reckless driving habits.
Why Is Telematics Used?
Without telematics, your insurance premiums would be calculated based on drivers like you. We like to think you are a better driver than people like you, and telematics can help you prove it.
If you are interested in learning more about lowering your insurance rates – with or without telematics – contact the team at innovante insurance today. We are ready to help!
