Car Insurance Guide

Insurers use a wide variety of factors to determine your insurance rates. The underlying assumption is that all these factors will help them determine how likely are you to file a claim.

Since the insurance company is looking to earn a profit from every policy sold, it wants to make sure that the price (i.e., your premium) is proportional to the risk.

Each claim that you file is a potential outlay and could reduce the profit of the insurance company. Therefore, your insurer will ask you about your age, marital status, gender, your credit score, and your driving history.

Each of these is used to estimate your driving behavior. E.g., teens are considered high-risk drivers and therefore pay the highest premium of all policyholders in the voluntary insurance market. On the other hand, insurers may consider a married individual less risky.

However, all these are estimations of your driving behavior. Some teens can be less risky, whereas a married person can drive recklessly.

What if you do not need to estimate driver behavior? What if your insurance premium is customized based on your driving style?

You stand to save a lot on premiums by driving safely. Whereas, your insurer can accurately price your premium based on driving behavior. Your insurer can quote a competitive rate and at the same time, correctly manage their risk.

No more estimators but data-driven insurance assessment.

This is the promise of telematics.

In this guide, we will help you understand everything that you need to know about telematics in car insurance.

Before understanding the benefits of the use of telematics in auto insurance, we should understand the current statistics in road safety.

Road safety is not important for only you or the insurer but also for the government. While safer roads would mean fewer claims for insurance companies, the government wants to make roads safer for the residents.

According to the National Highway Traffic Safety Administration (NHTSA), there were 37,133 fatalities due to crashes in 2017. According to NHTSA, speeding resulted in 9,794 deaths in 2017.

If you count major and minor crashes, there were 6.5 million crashes with 2.7 million injury victims.

All stakeholders, including you, insurance companies, and the governments, will want to reduce these trends.

How do you do it?

Governments use traffic tickets, license points, and educational programs to improve driving behavior on the road.

Insurance companies may award discounts for a good driving record.

But all the incentives and fines do not measure driver behavior. Instead, insurance companies calculate these based on past data rather than present patterns of behavior

Driver events data may include miles clocked, acceleration & deceleration, cornering speed, etc.

The data from telematics systems can be used to track stolen cars or help manage the maintenance schedule.

However, the first products introduced in the market are basic usage-based insurance policies. This basic pay-as-you-drive (PAYD) insurance products are essentially priced based on the number of miles you drive.

ematics insurance industry has evolved beyond the basic PAYD. In this section, we will understand the different types of telematics systems in the market and the type of data collected by insurance companies.

 What are the types of usage-based car insurance?

The basic usage-based car insurance (UBI) is only concerned with the miles you clock. The parameters measured include distance, time, and location.

Now, let us understand how this basic system useful for an insurance company:

Let us assume that you are driving a reasonable distance but are usually out in the night-time.

According to the National Highway Traffic Safety Administration (NHTSA), nighttime driving is three times more fatal than daytime driving. Insurance companies generally consider after dark to be riskier than day-time driving and, therefore, may tag your driving schedule riskier than average.

However, there are now more sophisticated systems to understand driver behavior.

While UBI or PAYD gives financial incentives to drive less, other programs such as pay-how-you-drive (PHYD) plans will measure your driving style to calculate risk.

In a PHYD plan, the car’s telemetric system will measure vehicle speed, acceleration, braking, corning speed, etc.

The factors used in pay-how-you-drive systems utilize real-time data to create a bespoke insurance plan.

 How do insurers collect driving data?

But, how does telematics systems record your driving data?

Different applications require different types of devices or methods to record your data.

Some insurance companies may use your phone to record and report the driving behavior using an application. However, some systems may require you to install a device in your car that will record and transmit driving events.

However, before we understand the different devices, let us first understand what a telematics device is?

Insurance companies provide telematics devices that connect with GPS and onboard electronics to record your driving behavior.

Advanced Defensive Driving: Take it to the Next Level

According to the National Safety Council, a preventable accident “is one in which the driver failed to do everything that reasonably could have been done to avoid the crash.” Experts agree that driving defensively is your best bet at making sure a crash, collision, or accident doesn’t happen to you. We’ve already discussed the basic concepts behind defensive driving, which include scanning and visualizing everything, having an escape route, and not becoming distracted. Now let’s consider some more advanced, preventive measures a responsible driver can take to avoid a potentially life-threatening crash.

Maintain Your Car

Regular maintenance on your car significantly helps its road performance, especially in potentially hazardous driving situations. You can’t drive a car defensively if its tires are in need of air, windows, rearview mirror, and signal lights are dirty, and brake pads are worn to shreds. Here are a few steps you should take to keep your car running safely and efficiently:

• Check Your Tires Make sure your tire pressure is where it should be. The recommended pressure for your car’s tires will be in your owner’s manual or in the driver’s side door jamb. When it comes to purchasing new tires, take into account the weather in your part of the country. Four snow tires total is the safest way to go if you anticipate driving in snow and ice.
• Align Your Tires If while driving your car seems to drift to one side or the steering wheel vibrates, you may need to have the tires aligned. Alignment actually refers to a car’s suspension, which can move out of alignment over time due to normal driving, a minor accident, or bumping against a curb. Check your owner’s manual to see how often your car’s manufacturer recommends aligning your car’s tires. Alignment helps to insure better handling, which is crucial for good defensive driving, as well as better gas mileage.
• Clean Your Car A dirty windshield or rearview mirror will prevent you from scanning and visualizing the road for potential dangers. And grimy signal lights or head lights will prevent other drivers from seeing you in bad weather or at night, which pretty much negates any effort you make to be a good defensive driver.
• Change Your Brake Pads If when braking, you hear squeaking or grinding, your brake pads may be worn out and in need of replacement. Knowing how and when to brake, especially in inclement weather, is a crucial skill for defensive driving. If you have an antilock brake system and need to stop in on an icy road, stomp on the pedal and when you feel the system’s pulses or hear it working, ease up a bit on the pedal until it’s only pulsing about once a second. If you don’t have ABS, you should push the brake hard and when the wheels stop turning, lift your foot so the wheels turn and rapidly press the brake again.

Other Advanced Defensive Driving Tips

• Yield, Move, Get Out Of The Way Driving defensively for the most part involves avoiding overly aggressive drivers. It may be frustrating to just step aside in order to give a bad driver room to do whatever they want, but it is the safest thing to do, not only for yourself but for everyone else on the road. When you encounter a speeding driver pressuring you to go faster, move into another lane, even if it means going slower. As a defensive driver, accept the fact that you may have to sacrifice your right of way in order to avoid a speeding ticket or collision.
• Plan a Route To avoid a time-consuming and potentially dangerous drive, plan out your route out in advance based on current weather, traffic, and road conditions. Local websites, radio, and even iPhone apps can provide you with the information you need before you hit the road and find yourself navigating road construction or an end-of-the-week traffic jam.
• Take a Course There’s nothing wrong with taking a driving course to brush up your skills, even if you’ve been driving for years. The AARP even offers a very inexpensive driver safety course in both classroom and online environments. Check with your agent to see if completing a driving course will give you discount on your car insurance or on roadside assistance plans.