Telematics car insurance: A boon for the insured & insurer
Telematics car insurance: A boon for the insured & insurer 8th February 2023
Telematics in car insurance is used by integrating telecommunications and informatics to understand a driver's risk profile and help create insurance plans in which the premium is charged according to the usage of the car.
Insurance companies consider several factors, such as the distance covered, frequency of vehicle use, average speed, driving style, etc., to arrive at the appropriate premium to charge for the respective customer. Let us understand telematics car insurance in detail.
How does it work?
Once a telematics device is installed in the car, it makes a complete note of the car’s movement and distance covered, when, and how it was driven. The device also tracks acceleration style and habits, braking patterns, average speed maintained, etc. The insurance companies analyse all this data and create the driver's risk profile. They then arrive at the fair premium that a particular person should be charged.
A boon for the insured?
Two cars purchased in the same month or a gap of a few days command the same premium for the regular insurance policies, even if the driver's driving style differs. Some drive cautiously and efficiently, while others may drive rashly and negligently. There is a need for rewarding good driving style. Insurance companies have developed a genius idea of telematics car insurance in which we have to pay the insurance premium according to our driving style.
Usage-based car insurance is a boon for the insured as it motivates the users to drive efficiently. They become aware of their driving habits and realise how they can improve.
Good driving behaviour is rewarded in such car insurance, and car users enjoy lower premiums on their policy. A good driving style will also help to achieve higher fuel efficiency, lesser wear and tear on the car, and lower maintenance costs for the owner. Moreover, a cautious driver is less likely to get into a car accident.
Telematics car insurance is a boon for the insured who use their car less and still have to pay high premiums. This helps them to pay a lesser premium as the premium also depends upon the distance covered under such policy.
A boon for the insurer?
Telematics makes the drivers drive at appropriate speeds and avoid indulging in high-speed and rash driving. This means that car accidents should go down considerably, resulting in a much lesser number of car insurance claims.
Therefore, the insurance company will stand to benefit from such car insurance. Lesser claims mean lesser expenses, resulting in higher profits for them. Also, such insurance will provide a lot of driving data to the insurance companies. They can analyse it and offer customised insurance policies to their clients. This will help them create an improved clientele and increase their market share and profits.
Car owners should consider several questions, such as the frequency of their car usage, driving style, and premium amount compared to their existing car insurance policy.
Such car insurance is a boon for both the insurer and the insured. Time is not far when technology, combined with telecommunications, will take over, and telematics car insurance will become the best choice among all the available options in the market.
*Telematics car insurance is not much prevalent in India as of now. It is just in the introduction stage, and the concept is new to most users. Hence, it will take some time to evolve and spread. Therefore, contact your insurance provider for further details.
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Disclaimer: The information provided above is for illustrative purposes only. To get more details, please refer to policy wordings and prospectus before purchasing a policy.