Is telematics insurance a silver bullet for young drivers?

Young drivers can have a difficult time getting on the road.  After the expense of driving lessons and buying your first car comes the unavoidable issue of insurance – and car insurance for young drivers is likely to leave you with a bill that is more than the cost of the car itself.  A new kind of in-car “telematics” technology could tip the balance and help young drivers get onto the road.

What’s the issue with young drivers, anyway?

All else being equal, younger drivers will pay more than older drivers for their car insurance.  The reason is the risk they represent – young drivers are significantly more likely than their older counterparts to be involved in a crash.  What’s more, young drivers have less time to build up a driving history in the form of a no-claims discount (NCD).  The result is that insurance companies find it difficult to tell whether a young driver will be sensible and vigilant, or unpredictable and reckless.  So until young drivers build up a proven track record, they all end up paying figures well into four figures.

Telematics – a potential solution

Given my explanation of the “young driver problem” above, one solution in theory stands out – find a way to tell if a driver is a low or high risk much sooner.  Without having to rely on NCD.  Well, this is where telematics comes in.  By fitting a device in a young driver’s car, insurers could remotely track a driver’s habits.  They could then determine, after just a few months, whether a driver’s habits make them a low or high risk.  Discounts could then be offered much earlier, with young drivers separated from the pack and treated as individuals.

Further benefit arises from the fact that telematics insurers won’t attract many reckless or careless drivers – the risk of their insurance premium would likely deter such individuals.  This self-selection keeps bad drivers out and prevents insurers from having to pay their expensive claims.  The result is better value insurance for customers of this insurer.

Restrictions & privacy

Some insurers use telematics to impose curfews on young drivers.  Statistics show that driving at night, especially on Friday and Saturday, is a high risk activity.  One-off fees are sometimes charged for driving after 11pm.  Other insurers limit mileage based on the idea that the more you drive, the more likely to be involved in a crash you are.  Both of these methods are enabled by the GPS and timing monitors within the black box device.

Most insurance companies offering black box schemes make strong promises about the way your data will be used.  Data security and privacy will be key in growing consumer support, as adoption of a device that tracks your movement will no doubt raise eyebrows amongst certain groups.

Summary

Telematics car insurance looks like becoming a valid alternative for young drivers seeking to get on the road, and in time could be the norm for teenage drivers and the recently passed.

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