Over the years we have seen some major developments in the world of technology and mobile apps but the car insurance industry has on the whole failed to keep up. When applying for insurance cover you may be “penalised” as a newly qualified driver, see your premiums bumped up in the event of a one-off accident and see your premiums gradually rise year-on-year. There is an argument to suggest that the insurance industry business model is both outdated and flawed.
Grouping individuals together on the basis of their age and their car driving experience helps to create the profile of an average driver. By definition, some drivers will be better than average and some will be worse than average. However, why should someone who drives in a safer fashion than their next-door neighbour, in the same age bracket, pay the same premiums?
Are “Big Brother Is Watching” Concerns A Red Herring?
Historically, the idea of installing a black box telematics system into all vehicles on the road has had the privacy police up in arms. While it would be foolish to suggest that these black box systems could not be used to track vehicles, is Big Brother not already watching us?
Even today the authorities can pinpoint our movements and whereabouts via:
- Credit card use
- Number plate recognition cameras
- Employment records
- Cashpoint withdrawals
In reality, if there is really a threat from Big Brother then it is with us already.
What Does A Black Box Telematics System Do?
In a similar fashion to the black box on an aircraft, the modern day car black box telematics system will record an array of actions and create a driving score which you can compare and contrast to previous journeys. Simple actions such as your braking technique, how you accelerate, how you steer into the corners and how often you exceed the speed limit are all taken into account.
This is all fed into a database which in theory allows insurance companies to offer a personalised insurance package to cover your particular driving style. In theory, it is also possible to consider various aspects of an individual’s driving journey by journey (even mile by mile) and adjust their premiums accordingly. While insurance companies are nowhere near the stage of “real-time premiums”, there is talk of journey by journey insurance using mobile phone apps and the latest cutting-edge technology.
RAC Insurance Customer Feedback
The subject of vehicle black box telematics is headline news again after the RAC released a report of feedback from RAC insurance customers with telematics-based insurance cover. While the headline figures (this was a fairly comprehensive survey taking in 1300 drivers) are attention grabbing in their own right, with 6 out of 10 drivers claiming the telematics systems made them adopt a safer driving style; there are also some interesting trends just below the surface.
Improved Driver Awareness
Of the 1300 drivers who took part in the survey an impressive 806 believe that the driving score available through the system made them more aware of their driving style. The system is able to score each journey, and cumulative data, in terms of smoothness and safety thereby making drivers more aware of issues around them. In a similar fashion to speed cameras, if you see a speed camera then you automatically revert back to the appropriate speed for the situation. In some cases, the existence of a speed camera makes you actually slow down to well below the speed limit such is their power.
Understanding Driving Techniques
Of those who reported an improvement in their driving, we saw that 69% were more aware of what made a “safe driver”, 58% confirmed that they now rarely exceed the speed limit and 44% have changed their braking technique. Even these three elements in isolation can have a material impact upon various areas of the driving insurance market.
We know that road traffic accidents are an integral part of the personal injury claims market with whiplash injuries especially common. Even though we regularly see warnings about using mobile phones while driving, ensuring your vehicle is properly maintained and staying alert at the wheel, there is little focus on actual driving techniques. Once you pass your driving test, once you have ticked all the boxes then you are quite literally free to drive anywhere in the UK.
There is no doubt that black box telematics systems will have a material impact upon road accident injury numbers going forward. There will always be an element of the driving fraternity who “know best” and will take little advice but the majority, once they are made aware of various safety techniques, have the potential to show significant improvement.
There are two factors to take into consideration when it comes to insurance premiums and black box telematics systems.
Insurance Premium Personalisation
It has long been a bone of contention that safe drivers are penalised by the general standard of driving across the UK. We see many people who have driven accident free for decades paying premiums which on the surface seem to be reducing in cost, but don’t always reflect their driving style and history. The introduction of telematics could be a pivotal moment in the insurance industry and could potentially dismantle the old age groupings and the exorbitant cost of insurance for new drivers.
There is real hope that these new systems will focus drivers more on safe driving techniques and ultimately lead to fewer accidents. This in itself is obviously a very important point and with fewer accidents, come fewer cost for the insurance company which are historically passed on to drivers. So, while the safety of drivers, passengers and pedestrians is obviously paramount there will be a long-term benefit to many different parties.
Tackling Young Drivers
It is fair to say that the introduction of new technology is often best accepted by those of younger years. The survey by the RAC confirmed that those who benefited most from black box telematics were the age groups between 17 and 20 (71%) and 24 to 44 (57%). Those aged 70+ tended to report reduced benefits from the telematics systems which could be a reflection of their driving experience over many years.
We know that on average 58% of those motorists who took part in the survey said they were not actively looking for telematics-based insurance services. Interestingly, in a reflection of the younger generation and their relationship with new technology, 57% of those aged between 17 and 24 were actively seeking this type of policy. This has the potential to make a serious difference for newly qualified drivers who have a safe attitude on the road.
Even though black box telematics insurance services have been around since the turn-of-the-century, there is still a genuine reluctance to take advantage. Information gleaned to date will prove priceless in the longer term and benefit those with a more considered approach to driving on the road. While we often focus on high-speed road traffic accidents, there perhaps needs to be just as much focus on those driving at a significantly reduced speed. Historic accident data shows that driving well above and well below the appropriate speed limit can cause serious accidents.
Is It Really That Simple?
As you will be aware, many areas of the insurance industry rely on discounted offers to new customers which in reality push up premiums for current customers. This is why even “safe drivers” often see a gradual increase in their premiums over the years. Using historic and current data it is possible to predict with a certain degree of accuracy the number of accidents and personal injury claims relating to road traffic accidents year by year.
As a consequence, applying cost variables to claims for specific injury groups allows insurance companies to calculate their potential liabilities for the immediate future. They will also need to account for the cost of their services and a degree of profit. It is then simply a case of apportioning specific premiums to specific age groups, as things stand, to ensure that insurance industry liabilities will be covered. However, forcing drivers to focus more on their own driving style, potentially making them safer drivers, will help to reduce premiums, reduce the overall cost for the insurance industry and inevitably improve road safety.
Insurance premiums have always been a bone of contention for drivers with a more conservative attitude, compared to those in the same age group, with a potentially reckless attitude. While the benefits of black box telematics have been well covered, it is the gradual and potentially enormous improvement in road safety which will bear the largest fruits.
Improved awareness and education regarding road safety will improve the driving styles of motorist today, their children, their children and their children after. We know that a large number of road traffic accidents in the past could have been avoided with safer driving styles. Perhaps, black box telematics systems offer a win-win situation, a reduction in premiums, accidents and deaths?