The Newest Way Your Insurance Company Knows How You Drive
Remember when your auto insurance company only knew about your driving record, your accidents, your tickets, and maybe your credit history? Those days are changing. Today, there is another source of information that can potentially tell an insurance company much more about how you actually drive: your smartphone or a connected device in your vehicle.
It is called telematics, and it is becoming an increasingly common part of the auto insurance world. You may even already have access to a telematics program through your insurance company without realizing exactly what it can do.
For some drivers, telematics can mean an opportunity to save money on car insurance. For others, it raises an important question: How much does my insurance company really know about the way I drive?
What Is Telematics?
Telematics is technology that collects information about your driving and sends that information to an insurance company. Depending on the program, this information may come from a smartphone app, a device plugged into your vehicle, or technology already built into your car.
The goal is to move away from relying solely on traditional factors such as your age, driving history, vehicle and location and instead look at your individual driving behavior.
That can include information such as how hard you brake, how quickly you accelerate, how many miles you drive, and when you tend to drive.
What Can Your Insurance Company See?
This varies from one insurance company and telematics program to another. Not every program collects the same information. Depending on the program, your driving data could include:
- Miles driven
- Hard braking
- Rapid acceleration
- Sudden changes in speed
- Time of day you drive
- How frequently you drive
- Potentially distracted driving behaviors
- Information related to where or when the vehicle is being driven
Some programs are designed primarily to measure driving habits, while others may use additional vehicle or smartphone information. That is why it is important to read the terms of the specific program before enrolling.
Could Telematics Lower Your Car Insurance Premium?
This is the part many drivers find appealing.
Some usage-based insurance programs offer discounts to drivers who demonstrate safer driving habits. Instead of simply being classified as a "good driver" because you have avoided accidents and tickets, your insurance company may have additional information showing that you tend to drive cautiously.
For example, someone who drives relatively few miles, avoids hard braking and acceleration, and does most of their driving during lower-risk times may potentially qualify for a discount depending on the insurer's program.
For a careful driver, that can be an attractive proposition: Let my driving behavior help determine what I pay for auto insurance.
But There Is a Catch
Before signing up for a telematics program simply because it offers a potential discount, make sure you understand how the program works.
Some programs are primarily designed to provide discounts for safe driving. Others may use driving information more extensively when determining your insurance pricing. The potential impact can also vary by insurance company and state.
In other words, don't assume that installing an app automatically means your insurance premium will go down.
Ask questions. Find out what information is collected, how it is used, how long it is retained, and whether participation can affect your premium.
What About Privacy?
This is probably the biggest concern for many drivers.
Think about how much information your smartphone already knows about you. It can know where you go, how often you travel, and even how you move throughout your day. The idea of giving an insurance company access to driving-related information can understandably make people uncomfortable.
That's why privacy should be part of your decision. Before enrolling, review the program's privacy policy and terms. Pay particular attention to what data is collected and whether information is shared with third parties.
Telematics isn't necessarily good or bad. It is simply another way insurance companies can evaluate risk. The important thing is understanding what you are agreeing to.
Is Telematics Right for You?
That depends on how you drive and how comfortable you are with sharing driving information.
Telematics may be worth considering if you are a low-mileage driver, have good driving habits, or are interested in potentially earning a usage-based insurance discount. It may be less appealing if you drive frequently at night, regularly travel long distances, or simply don't want your driving behavior monitored.
And remember, your insurance rate is based on more than just how you drive. Your coverage limits, deductible, vehicle, claims history, driving record, location and other factors can all influence the cost of your auto insurance.
The Bottom Line
Insurance is becoming increasingly data-driven. Telematics gives insurance companies a new way to understand driving behavior, and it gives consumers another potential way to influence the price they pay for car insurance.
But the cheapest insurance isn't necessarily the best insurance. A lower premium doesn't help much if you discover after an accident that you don't have enough liability coverage, uninsured motorist protection, rental reimbursement, or other coverage you actually need.
If you're considering a usage-based insurance program, or if you simply haven't reviewed your auto insurance lately, it's worth having a conversation about your options.
Quest Financial & Insurance Services can help you understand your auto insurance coverage, compare available options, and determine whether a telematics or usage-based insurance program makes sense for your situation.
Have questions about your current coverage? Give us a call at 330-470-8007. Sometimes a quick insurance review can uncover opportunities to save money—or, just as importantly, identify coverage gaps before you need to file a claim.