How Telematics Affect Your Auto Insurance

Car dashboard with neon interface communicating telematics affect on auto insuranceYour personal information is precious, so when insurance companies began introducing incentives for policyholders to install tracking devices – also known as telematics – in their vehicles, the public was justifiably wary. But if you can look past the myths of telematics, you can discover the benefits these devices provide to both drivers and insurance providers. Whether you are still suspicious or are looking to install one of these devices in your vehicle, it’s important to familiarize yourself with the ways telematics work and affect your auto insurance.

What is Vehicle Telematics?

Vehicle telematics is an opt-in program that uses a small tracking device you plug into your vehicle’s onboard diagnostic port. Once enabled, the device collects and transmits data on your driving habits to your insurance provider. The following are a few of the data points that are recorded:

  • The length and time of a drive paired with average speed.
  • Miles per hour in relation to the speed limit.
  • The number of times the driver brakes hard or engages the anti-lock brakes.
  • Registered vehicle impacts or instances where the airbag deploys.
  • The length of time a service light remains unresolved.

The insurance provider will use these metrics to adjust your insurance rates according to the risk level of your driving habits.

What are the Misconceptions of Telematics?

A lot can be implied when you receive a telematics device in the mail. But just like common car insurance myths, it’s good not to give in to any of the following misconceptions:

  • It can void your warranty. Plugging one of these devices into your vehicle doesn’t constitute tampering. These devices are approved for use by automakers.
  • It tracks your every movement. Telematics doesn’t actually track your location; it simply tracks speed, fuel economy, and other vehicle conditions.
  • It means your insurance company doesn’t trust you. Telematics is an opt-in program, and the data from customers is used to write more effective policies.

If you can ignore these misconceptions, it can allow you to focus on safer driving techniques that can lead to a reduction in your auto insurance costs.

How is the Data Used to Calculate Auto Insurance?

Opting in for the use of a telematics device may come with a discount. But beyond that, for policyholders who exhibit signs of safe and defensive driving – such as driving safe speeds and servicing their car’s needs promptly – telematics can lead to a reduction in their premium. Alternatively, however, drivers who drive recklessly may report several instances of speeding or signs of distracted driving, such as hard braking, resulting in an increase in insurance premiums. Furthermore, if a policyholder drives more miles than previously reported to the insurance provider, rates will increase.

Vehicle telematics were derived from the thought that how you drive should influence your insurance costs. If you strive to become a safer driver and take precautions to ensure your car is always road-ready, you will see the benefits these tracking devices can offer. Now that you know how telematics affect your auto insurance, it is important to make sure you are covered by the most appropriate auto insurance for your needs. At TJ Woods Insurance, our years in the business have given us the experience to perfectly match people with the right policies. Contact us today for a free quote.