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What is Telematics Insurance?

Last updated : December 5, 2024
Improve safety

Telematics insurance, often called black box car insurance, is a type of policy where a device is installed in a vehicle to track driving behaviour. This device, or ‘black box’, monitors factors like driving speed, time of day, and location, providing a detailed picture of an individual’s driving habits.

By analysing this data, insurers can assess a fleet’s compliance with road safety rules and driving best practices, enabling them to offer fleet managers a more personalised renewal quote based on their drivers’ performance.

How does telematics insurance work?

When a telematics insurance policy is purchased for a fleet, the insurer will fit a black box to each vehicle. This device then collects data on various aspects of vehicle usage, such as the times and places an employee drives, their typical mileage, as well as how they brake, accelerate, and handle corners.

The specific data gathered may vary by insurer, but the information is normally used to generate a driving score that directly influences the cost of a telematics car insurance policy. Additionally, the GPS technology of telematics devices can assist with vehicle recovery in case of theft, evaluate the efficiency of fleet routes, and provide valuable information in the event of an accident.

Different types of telematics insurance

There are several types of telematics insurance policies available for vehicle fleets, each involving a black box, OBD plug-in device, or smartphone app to collect data during operations. Generally, the device type and data saved will differ depending on the insurer.

  • Black box insurance: This is the most common form of telematics insurance. A black box device installed in each vehicle tracks driving behaviours, producing indicative driver scores. The safer an employee drives, the higher their score, leading to lower premiums.

  • Mobile telematics insurance: With mobile telematics insurance, a smartphone app is used to track driving behaviour through the phone’s sensors. The app monitors factors like speed alongside braking performance to track individual on-road habits for both the fleet manager and insurer.

  • Pay-as-you-go insurance: Also known as ‘pay-per-mile’ insurance, these policies track the number of miles driven rather than specific driving behaviours. Fleet managers pay a base rate for such a policy plus an additional fee per mile.

What are the disadvantages of telematics insurance?

  • Potentially higher premiums: Telematics policies base discounts on a fleet’s overall driving score. If a fleet doesn’t consistently maintain a high score, it might not qualify for a discount and could even face higher premiums at renewal for poor or risky driving behaviour.

  • Additional fees: Some telematics insurance policies require a permanently installed device in each vehicle. While installation may be free, fleet managers could incur charges if the device needs to be removed.

  • Mileage restrictions: Certain black box policies set a cap on the number of miles covered. Exceeding this limit might void a fleet’s coverage, leaving managers unable to make a claim.

  • Limited transferability: Many telematics policies reward safe driving over time, which can mean staying with the same insurer to fully benefit. Relatedly, driving scores cannot be transferred to another provider, limiting fleet managers’ options.

What are the benefits of telematics insurance?

  • Promotes safer driving: Telematics insurance offers personalised feedback on driving habits across a fleet, helping it improve over time. For instance, if employees frequently take sharp turns, managers can alert them to adjust their driving style.

  • Potential for lower premiums: Fleets with high safety scores may see lower premiums than what standard policies offer. Similarly, low-mileage fleets might save money with a pay-as-you-go plan.

  • Increased theft protection: A telematics device can help locate a fleet vehicle and its cargo if it has been stolen, which is particularly important when operating in high-risk areas.

  • Accident liability support: If an incident occurs, data from a telematics device can help determine fault. In turn, speeding up the claims process and providing fleet managers with peace of mind.

Who is telematics insurance good for?

  1. Young or new drivers: Younger and new fleet drivers often imply higher insurance premiums due to limited experience. However, telematics insurance allows them to demonstrate safe and responsible driving, thereby decreasing rates over time.

  2. Drivers with previous convictions: Fleet drivers with past driving convictions, especially for dangerous driving, usually face higher premiums. Yet, a telematics policy can help prove their dedication to safer driving, decreasing costs while encouraging positive driving habits.

  3. Fleet managers: For small businesses and large companies managing vehicle fleets, telematics insurance offers a way to monitor driver behaviour, improve safety, and reduce costs based on employee performance and adherence to safety practices.

Implementing a fleet management solution integrated with telematics enables operators to monitor vehicle data and gain actionable insights. Ultimately, this fundamentally improves your drivers’ behaviour, leading to fleet-wide optimisation in areas like fuel consumption and productivity. 

Moreover, sharing this information with your fleet insurance provider can demonstrate a commitment to safety, lessening the financial quotes you receive. If you’re interested in these benefits for your fleet, then be sure to make an enquiry today.
MICHELIN Connected Fleet

Written by MICHELIN Connected Fleet

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