Telematics refers to devices that capture and analyze driving behavior. They are typically used by drivers who are in a usage-based auto insurance policy like pay-how-you-drive.
As usage-based programs expand and become more widely available, you may consider signing up for them but what do you need to know?
We've provided a comprehensive guide to answer the following:
What are telematics devices?
Telematics devices are any device connected to your car for the purpose of recording information about your driving habits. Typically, they are provided by your insurance company and installed in your car's on-board diagnostic port. However, some companies give you the option of using their mobile app to track your driving.
How do telematics devices work?
One way of understanding how telematics devices work in the context of car insurance is to compare them to the “black boxes” that are found in airplanes. When installed, a telematics device gathers vehicle usage data. Telematics devices are installed when you insert them into the computer diagnostic port typically located under the car’s dashboard.
Drivers with a standard car insurance policy will most likely not be using these devices. However, if you are insured under a usage-based policy such as pay-per-mile or pay-how-you-drive, you'll use a telematics device.
Usage-based policies base rates on how much you drive and reward you if you have safe driving habits. Telematics devices are used to assess your driving behavior and determine if you qualify for a discounted or lowered rate.
Telematics devices collect and measure data related to driving habits and behaviors. This includes:
- How many miles a car is driven per day, week or month. The more time you spend on the road, the more likely you are to be involved in an accident.
- What time of day the car tends to be driven. Driving in the middle of the night means your visibility is lower than during the day.
- How well or poorly the car is driven. Sudden braking, sharp turns and violating traffic rules all increase your risk of getting into an accident.
Be aware that if you have very poor driving habits and sign up for a telematics-based insurance policy, you could be penalized with higher rates. That includes those who speed, take corners too aggressively, brake too quickly and drive long distances, or mostly at night.
One thing you also need to know is that not all vehicles may be eligible for a usage-based program. Telematics devices might not be compatible with older cars. Before deciding if a usage-based policy is right for you, check with your insurance company to see if this will be an issue.
Is it worth having telematics-based car insurance?
Telematics-based insurance is meant to reward good and infrequent drivers by increasing the affordability of premiums.
Telematics could also help insurance companies reduce the number of claims by preventing crashes. That's because many of these devices employ tactics to make drivers aware of frowned-upon behaviors, such as beeping when a driver brakes too hard. Others allow users to view their driving data in the hopes that it will encourage better driving habits.
An added bonus of the device is that it can alert emergency services following an accident. However, not all devices do this.
When is telematics-based auto insurance not worth it?
You, as a car-owning consumer, might not find this technology completely attractive.
One worrisome aspect of telematics data collection is a number of privacy concerns. Some insurance providers have decided to limit the kinds of data they track. Also, some states have passed legislation limiting data collection and requiring insurers to outline how these gadgets are used.
Not everyone can take advantage of a telematics-based policy. Usage-based auto insurance is still relatively new and not offered in every state or by every insurer. Also, many older cars are ineligible for the program because they lack the port needed to input a telematics device.
Additionally, frequent or unsafe drivers will not likely benefit from having a telematics device installed in their car. Those on a pay-per-mile plan, which calculates rates based on how much you drive, may receive higher premiums if they’re constantly driving. If you are on a pay-how-you-drive policy and your insurance company finds that your driving habits are reckless, you can potentially receive a rate increase.
How do you know if telematics-based car insurance will benefit you?
Still on the fence about whether telematics-based car insurance is the best option for you?
Some companies allow you to demo their program and borrow a telematics device. You can see your driving habits for a short period of time and get an estimated rate based on the results.
If the company you're looking at doesn't have a demo, you can try recording how you drive for a week. You can purchase a telematics device online and use it to track your habits.
Companies that offer telematics programs
Telematics devices are used primarily for two usage-based programs: pay-per-mile and pay-how-you-drive. Since these programs are still relatively new, not every company offers them.
Here’s where you can find coverage and how much you can potentially save:
Pay-per-mile car insurance
|Company||Where is pay-per-mile insurance available?||Estimated annual savings*|
|Nationwide SmartMile||AR, AZ, CO, CT, DC, FL, GA, IA, ID, IL, IN, KS, KY, MD, ME, MI, MN, MO, MS, MT, ND, NE, NH, NM, NV, OH, OR, PA, RI, SC, SD, TN, TX, UT, VA, VT, WA, WI, WV, WY||An average 25%, compared to a traditional Nationwide policy|
|Allstate Milewise||AZ, DE, FL, ID, IL, IN, MD, MA, NJ, OR, OH, PA, TX, WA, WV, VA||Up to 30%-40%, compared to traditional insurance rates|
|Metromile||AZ, CA, IL, NJ, PA, OR, WA, VA||An average $741 a year|
|Mile Auto||AZ, GA, IL, OR||30%-40%, compared to your current rates|
|Liberty Mutual ByMile||CT, VA||An average 25%, compared to a traditional car insurance policy|
|*Rates are based on calculations listed on the insurer’s website.|
Pay-how-you-drive car insurance
|Company||Where is pay-how-you-drive insurance available?||Estimated annual savings*|
|Progressive Snapshot||Every state and the District of Columbia||$145|
|Allstate Drivewise||Every state||Contact your insurer.|
|State Farm Drive Safe & Save||Every state except CA, MA and RI||Up to 30%|
|Farmers Signal||Every state except HI, NY and SC||Up to 15% during each policy renewal and the possibility of saving an additional 10% by enrolling drivers under 25 in your household|
|Nationwide SmartRide||Every state except AK, CA, HI, LA, MA and NY||Up to 25%|
|Esurance DriverSense||Esurance has three different DriveSense programs, each serving different states.||Contact your insurer.|
|Liberty Mutual RightTrack||AL, AZ, CT, IN, MI, NH, NM, OK, AND, PA, TX||Up to 30%|
|GEICO DriverEasy||AZ, CO, CT, FL, IL, IN, LA, KY, MD, NC, NJ, NM, OH, OK, OR, PA, TN, TX, VA, WI||Contact your insurer.|
|USAA SafePilot||AZ, OH, TX, VA||Up to 30%|
|*Rates are based on calculations listed on the insurer’s website.|
What other safe driving discounts can you take advantage of?
Even if you are ineligible for a usage-based car insurance policy, or if you decide that telematics is not for you, you can still find other money-saving opportunities:
- Defensive driving discount: Each state has a defensive driving class that teaches you to be more aware of your surroundings, adopt the best safe driving habits and respond to emergency situations. You can complete the class at a certified school and receive a discount.
- Accident-free or good-driver discount: Some insurers have a discount available for drivers who have had no accidents or violations for a certain amount of time.
- Safety-device discount: Do you have anti-lock brakes or anti-theft equipment in your car? Taking that extra precaution can earn you a discount with most large insurers.
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