Car Insurance telematics, often known as in-car black box technology, has been hailed this year as the panacea for all the ills of insuring young drivers and claims to offer this class of driver cheaper car insurance.
The technology works by having a ‘black box’ fitted under the bonnet of the insured vehicle which measures the drivers performance and sends data using a variety of techniques, to the insurer for analysis and pricing.
Premiums are initially charged using known risk data and rating factors and then adjusted up or down over the course of the policy life. Many large car insurers have adopted the technology in a bid to win a larger share of this lucrative yet risky end of the market and in many cases premiums for young drivers have been reduced.
However questions are now starting to be asked about the accuracy of the data and the consequent pricing models.
The typical system works by measuring location defined by GPS, the time of day and certain performance related measurements for acceleration, speed, cornering and braking. A scoring method is applied to each of these criteria to determine the driver’s performance and additional premium or future discounts are applied dependent upon these scores.
Clients can then access their account either online or via a mobile phone app, where they can see how well the insurance company thinks they drive and discover whether they will get a refund or be charged more. The customer application often known as a dashboard shows the drivers perceived performance in a colour coded Green – Amber – Red layout with performance rated from 1 (bad) to 5 (Angelic).
However many drivers are now complaining about the fairness of the system and the measurement and charging methods and this week the BBC Radio 4 consumer complaints program ‘You and Yours’ reported on the growing number of dissatisfied drivers.
For example a car was driven for a short period of time by the youngster before he went away to university and was then driven exclusively by a parent. It was soon noticed that the dashboard scores were declining and charges might have to be paid. The usage was minimal – 20 miles per day on a straight road and saw the system was penalising her driving particularly for cornering and braking. In general there is a lack of trust in the calibration of the system and how data is collected over a period of time.
Steve Davis of online specialist car insurer Car-Insurance.tv said “Although the telematics driven policies can have benefits to both the driver and the insurer, the systems are still in the early stages of development and there are issues customers should be aware of especially regarding privacy.
The ‘Black box’ technology allows insurers to completely profile your life style and not just you’re driving skills. It can see where you go, when and how often. It can classify you as a particular type of driver which could affect you in the future. There are clearly problems with insurers adjusting the calibration scores and until a defined set of performance skill scoring is adopted across the board, many drivers will be financially disadvantaged.
To note – where multiple drivers have access to the same vehicle, the data cannot be trusted as a definition of risk and pricing anomalies will occur.