In the last few years, providers have used modern technology to come up with a great way for drivers to get cheaper car insurance, regardless of driving experience. This comes in the form of black box or telematics insurance.
In This Guide:
- What is black box insurance?
- How does black box insurance work?
- Is black box insurance always a good option?
What is black box insurance?
Black box insurance, also known as telematics insurance, is where an insurer installs a box into your car that records data about how you drive.
This box transmits the data to your insurer, who can then see whether you are a 'good' driver or a 'bad' driver. Based on this data, the insurer can then reward safe driving by lowering premiums, or increase it your have been driving dangerously.
Black box insurance is a popular method of insurance for drivers who are often considered high risk for insurers (for example, young drivers or new drivers); it allows those who do not have an extensive no claims history to prove to their insurance company that they are a safe driver.
How does black box insurance work?
The ‘black box’ that is installed in the vehicle is a small device that records information about driving habits, including:
- adherence to speed limits
- cornering data
This allows the insurer to build up an accurate profile of the policy holder and to tailor the premium accordingly.
Such policies can be particularly useful for newly qualified younger drivers whose premiums can often be prohibitively high due to national statistics that show them as particularly high risk when it comes to road traffic accidents.
Costs for conventional insurance policies for young drivers are based on Department for Transport statistics that show that a fifth of all newly qualified drivers are involved in some kind of crash within a year of passing their test, and that a third of all road fatalities are caused by 19-25 year olds.
With a black box policy, your premium will be based on your personal abilities and tendencies – rewarding careful drivers with much lower premiums.
There are different ways in which insurers can use telematics or black box technology in order to work out the costs of each insurance policy.
While some use data to work out a general profile of the driver and calculate premiums based on general performance, others work on a pay as you go basis, charging the policy holder for each mile driven. This is based on the fact that fewer miles driven means a lower risk of an accident occurring and a claim being made.
Is black box insurance always a good option?
As a young driver, taking out a black box insurance policy is one of the surest ways to save money on your cover, requiring you to simply drive carefully and responsibly and enjoy reduced premiums as a result.
You may need to wait for a year or so for your premiums to go down, as the insurer needs time to build up a profile of you as a driver, but once they do you can expect rates reduced by a third or more.
However, if you feel that you are likely to have a particularly high annual mileage, or to drive often at peak times (which will be defined by the individual insurer), then a black box may not be the best idea for you.
This is often the case for experienced, middle aged drivers who are likely to experience low premiums anyway and are thus not particularly likely to benefit from a telematics technology.