Black Box insurance – What is it, and will it save YOU any money?

Luke John Smith
express.co.uk

BLACK box car insurance, also known as telematic premiums, are a form of insurance that uses data to determine the amount you pay for coverage.

Black box technology is a colloquial term used to describe car insurance premiums powered by telematic data.

This data is gathered by a device kept inside the vehicle. Information gathered from the car is used to calculate risk and price.

Callum Rimmer, co-founder and CTO at By Miles said: “In a time where car insurance and car ownership are more expensive than ever, telematics unlocks an opportunity for people to be more intelligently charged for their car insurance at a rate that’s fairly tailored to them.

“The way consumers think about the sharing of data is changing, as shown by the success of platforms like Facebook or Google Maps, where your personal preferences or location status are updated in real-time in exchange for the use of a valuable service.”

He added: “We’re using the number of miles a customer drives as a way to more accurately and fairly price insurance premiums in real-time – it stands to reason that someone that drives less should pay less on their premium than a motorist who travels hundreds of miles a day.”

Telematics policies use on-the-road data to analyse risk and some insurance companies use a scoring systems to determine the premium cost.

A Direct Line spokesperson revealed how their policy works on a score system and what factors are considered when calculating risk.

The spokesperson told Express.co.uk, “Direct Line’s telematics insurance, DrivePlus, gives customers a score for each journey they complete and these journey scores feed into an overall driving score.

“The cost of the policy is reviewed at the point of renewal and takes driving scores from the prior year into consideration.”

“The driving score is calculated by analysing driving style, including smoothness, braking and contextual speed and where and when you drive.”

Why would I buy black box car insurance?

In theory, black box insurance can offer a reduction in the amount you pay. By using real-world data about the driver to determine the premiums, it should result in a fairer charge.

However, reckless driving or things deemed to be a breach of policy can see premiums skyrocket.

The appeal of telematics policies is broadening as a way for all drivers to try and access lower premiums

James Blackham of By Miles

Factors that can dramatically increase a black box insurance plan include driving outside the previously-agreed time window and consistently breaking speed limits.

A Direct Line spokesperson said: “Many who take out telematics insurance are newly qualified drivers who are building their experience and the ongoing support and feedback we provide through the app and our regular emails have been proven to help improve driving score, ultimately making them safer drivers.”

“When a Direct Line DrivePlus customer takes out their policy they get an upfront discount just for choosing telematics, so it is the cheapest option.”

James Blackham of By Miles added: “A premium can be tailored to them [young drivers], rather than automatically getting a heavily inflated quote that’s being pushed up by bad drivers of a similar age.

“Now, with the average cost of insurance premiums rising to over £800, due to factors like higher Insurance Premium Tax (IPT), more compensation claims and changes to the Ogden Rate, the appeal of telematics policies is broadening as a way for all drivers to try and access lower premiums.

“We’re looking to bring telematics out of the youth market and bring the benefits of smarter, fairer pricing to a wider audience.”

James Blackham said: “The British Insurance Brokers Association (BIBA) issued a report that claimed young drivers’ insurance premiums are reduced by as much as £1000 in some cases by a telematics insurance policy.

“Safer drivers can also make savings of up to 25% over a non-telematics policy.

“The growth of telematics insurance policies is very strong year-on-year (40% growth in 2016), which provides a strong indication that drivers are saving money.”

According to a report by MoneySuperMarket.com telematics policies can slash premiums by up to 25 per cent for safe drivers.

Can this new technology revolutionise how we pay car insurance?

Car insurance policies are becoming increasingly expensive. In June, the average policy hit a record high in the UK.

Experts predict that by 2018, the average policy could cost in excess of £1,000.

By Miles are one of the first car insurers in the UK to offer a pay per mile car insurance policy.

These kinds of policies aim to reduce the amount a motorist has to pay and address the growing expenditure drivers are facing.

Using a telematics box, the size of a matchbox, fitted under the steering wheel, drivers are charged for their insurance based on the amount they drive.

This means that rivers will not have to fork out annual lump sums and be able to have a fairer premium.

A By Miles spokesperson said: “Traditional car insurance models are unfair because they don’t properly account for the miles people drive.

“As a result, car owners driving fewer miles than the national average are effectively subsidising the insurance costs of higher mileage drivers.

“With half of the UK population driving under the low mileage threshold of 7,000, a lot of people are currently overpaying for their insurance.

“The By Miles monthly subscription model brings an end to the hassle of annual renewals and negotiations, and the flexibility of our pay-as-you-go rate means that if you drive less, you pay less.

“So for occasional drivers, a trip abroad or a few busy weekends spent off the road will mean they only pay the subscription cost and nothing more, while a quick drive to the supermarket will simply add the cost of that journey on top.

“By Miles offers fully comprehensive insurance policies as standard, while customers will continue to accrue no claims bonuses for incident-free driving.

“In the future, car owners will also be able to earn exclusive rewards and automatic premium discounts for good driving on a By Miles policy.

“Aside from the potential savings to be made from a pay-as-you-drive policy, added features in the By Miles app like Car Medic, Low Battery Warning and Congestion Charge Reminders can save customers money by diagnosing mechanical issues before the damage gets worse, avoiding the need for a call to the breakdown service or preventing drivers getting a fine from Transport for London.”

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