How Car Insurance Companies are Using Telematics Technology

While insurers still rely on risk profiles when it comes to calculating your car insurance premiums, some of the best car insurance companies use a telematics device for a car or integrated telematics technology to assess customers' risk more accurately. Discover more about the workings of telematics technology and how insurers are using telematics in conjunction with car insurance.  

What is telematics technology?

Car insurance companies in South Africa provide comprehensive car insurance. Your premiums are calculated based on your risk profile, which includes your driving behaviour. This profile can be influenced[1] by age, gender and driving record. 

For decades, the world has used Global Positioning Systems (GPS), the internet, and machine-to-machine connections. As time has passed, these tools have been joined by integrated wireless technology that collects, stores, analyse and transmits data between networked physical devices. These advances have combined to form telematics — a word combining telecommunications and informatics that describes systems using communications and information technology to transmit, store and receive real-time information between devices and remote objects on a network. Telematics devices can integrate recording devices, input-output ports, SIM cards, modem interfaces, accelerometers, sensors and buzzers. The data collected can be stored in the cloud or sent directly to a server for processing into useful information.

How telematics devices work in cars: features and benefits

Car insurance companies in South Africa traditionally used GPS devices to monitor customers' vehicles — but they only provided basic speed and location information and were easy for thieves to find and remove. Manufacturers have since switched to telematics (including accelerometers, sensors, cameras and diagnostic ports) to collect data for analysis. A telematics device integrates with smart vehicles, running off a car's electrical system or internal battery. They can offer these benefits: Safer driving: Telematics technology can alert drivers about unsafe hard braking, cornering and acceleration; excessive or inappropriate phone usage and seatbelt use. It could even activate a panic button should someone hijack or steal your car. Extended lifespan: Telematics can track your car parts projected lifespan. It can integrate service, maintenance and warranty information and diagnostics to notify you of faults before they happen. Money saving: By monitoring your driving patterns and any accidents, telematics can encourage safer, more efficient driving that reduces fuel consumption and the likelihood of logging claims. Efficient driving: Telematic technology can highlight and detect safer or quieter driving routes, reducing traffic and transit time while encouraging driving at safer times. Reduced liability: Telematics devices can gather information during a car accident that supports your testimony in legal proceedings. Improved efficiency: This technology can manage business vehicles, and you can detect under-used vehicles or poorly performing drivers. It can automatically calculate employees’ driving hours and performance-related information accurately and with less paperwork.

4 ways car insurance companies use telematics technology

Here are some reasons why insurers use telematics devices:

1. Improved risk assessment

Telematics profiles individual drivers instead of relying on opinions or guesses. It evaluates their actual driving behaviour. 

2. Reduced fraud

Fraud can eat into a business's profits. A telematics device makes it harder for criminals to commit fraud. Car insurance companies prevent fraud by being able to assess an accident or theft situation and corroborate a person's account of it with documented evidence from the device. 

3. Customer satisfaction 

It’s frustrating when other drivers bend or break the law. The next time a car cuts you off or the car in front of you takes a risky turn, you can rest assured that car insurance companies are taking notice of this sort of driving behaviour. 

4. Useful insights

Car insurance companies assess millions of drivers to create risk profiles. Telematics can provide the information they can share with customers and car manufacturers. For example, if thieves target a car make and model because its locking mechanism malfunctions, insurers can remind customers to check their cars after locking and inform manufacturers about the security risk.

How telematics affects short-term insurance

You may be wondering how telematics technology will impact your car insurance? It can do so in two ways: reinforcing good driving and discouraging you from developing poor driving habits. This is called behaviour-based insurance. Your car's telematics device can link to an application or website which logs your driving patterns. Ultimately, this could raise or lower your premiums by personalising your pricing. Here's an example.

Luke is 20 years old and has bought his first car. He has to insure it but feels reluctant as his risk profile means he'll pay more for insurance. Luke's office is close to his home, and he leaves and departs early each day to avoid traffic. He prefers not to go out late at night and takes a ridesharing service when he does. His telematics device notes and records Luke's cautious driving, lowering his risk profile and premiums.

On the other hand, Lara is 30 years old. On paper, her risk profile indicates a safe driver. In reality, Lara frequently often speeds to work. She enjoys clubbing, and although she doesn't drink, she often comes home after the sun has risen. Lara's premiums are higher than expected as her late-night habits, speeding, and aggressive driving are all flagged by her car's telematic device.

A car insurance company you can trust

We can help you meet your car insurance needs. Browse our full product portfolio, which range from fully comprehensive to basic third-party-only insurance options. Discover more by applying for a free and quick car insurance quote online. 

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Sources:

[1] Arrive Alive: Car insurance and safety 

Disclaimer: The information in this article is provided for informational purposes only and should not be construed as financial, legal, or medical advice.