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Reducing premiums with telematics

By Craig Perry, 8th February 2024

Category: Car insurance

Telematics can be broadly defined as the combination of information technology with telecommunications. It generally relates to the integration of telecommunications networks with vehicles to collect data on location, driver behaviour, engine performance and vehicle activity.

While most of us will have become aware of telematics in applications such as black box devices to monitor lorry drivers’ mileage and hours travelled per day, it’s increasingly being associated with mobile phone apps that collect data as you drive for insurance purposes.

The first telematics insurance policies were mainly focused on young drivers, but all of the signs are that they are increasingly relevant to any motorist who wants to exchange cheaper insurance premiums for safer and greener driving.

Our research with UK drivers shows that appetite for telematics insurance is certainly on the rise. We found that the vast majority (81%) of UK car drivers are now aware of telematics insurance.

And while just 8% of drivers surveyed currently use telematics devices, 35% of drivers say that they are either quite likely or very likely to consider a telematics policy at their next insurance renewal. This rises significantly to 61% of younger drivers aged 18-24 who will consider a telematics policy in the near future.

Younger drivers routinely face higher motor insurance premiums because of the risks associated with their relative inexperience. This could explain why more than a quarter (26%) of drivers aged 18-24 surveyed claim to already use a telematics device, over three times the average number of drivers surveyed who claim to have one.

When asked what would convince them to use a telematics insurance policy, 59% of all drivers said they would want to see substantially lower premiums. This was followed by 29% who would like reassurance that their driving data would be secure.

A fifth (20%) of drivers said they needed proof that a telematics insurance policy would be better for the environment to consider such a policy. However, almost twice as many (39%) younger drivers aged 18-24 say their main motivation would be that it would be proven to be better for the environment.

So what benefits are drivers seeing from using telematics insurance? The majority (85%) of drivers who already use a telematics device report reductions in their annual premiums of up to 20%. Almost three-quarters (70%) have seen reductions of between 5% and 15%. This rises to 80% of drivers aged 18-24 who have reduced their policy costs by between 5% and 15%.

It’s interesting to see the direction of travel for telematics insurance as people become more conscious about the impact of driving on the environment.

And it’s not surprising that younger drivers in particular are drawn to the benefits of telematics insurance. Their relative inexperience means they face the highest premiums, so it’s great to see how many younger drivers are already seeing a link between using telematics insurance and lower policy costs.

Our service will help drivers of all ages save money while also encouraging safer road travel. Environmentally conscious driving doesn’t just lead to lower premiums, but also lower fuel costs and slower driving speeds. Telematics insurance is definitely here to stay.