What is black box insurance?
Black box insurance, or “telematics car insurance” as it's also known; monitors driving style, records behaviour, and rewards careful drivers with lower premiums.
It involves a black box being fitted to your vehicle which uses satellite technology to assess speed, braking, acceleration, cornering and the time of day journeys are made. Some black box insurance policies also operate a curfew with an excess premium charged if the car is used during dangerous night-time hours.
The data is transmitted to the insurance provider by GPS and the company can tell how likely a driver is to make a claim.
This allows insurers to offer discounts to those who demonstrate safe driving, and impose higher premiums on those who are consistently poor drivers. Careful drivers can typically save up to a third - and in some cases, even more.
Driver IQ, a site which offers a platform of online tools designed to help young drivers, expects that one in four car insurance policies will be telematics based by 2020, while the British Insurance Brokers' Association (Biba) suggests that sales of black box insurance policies have increased five-fold in the past two years and are expected to reach 500,000 in the next two years.
What are the advantages?
Black box car insurance policies can be particularly advantageous for young drivers who can find it harder than experienced drivers to get affordable cover - and in some cases, to get cover at all. This is because insurers calculate policy costs according to statistical risk, with many insurers deeming young motorists too high a risk based on the accident statistics.
Figures from the Association of British Insurers (ABI) shows drivers between 17 and 24 are three times more likely than other road users to be responsible for “catastrophic claims”.
As the technology works by recording driver behaviour, premiums can be accurately applied to a motorist's exact profile. This means safer young drivers can pay less for their cover - although you may have to wait for a year to benefit.
With a black box insurance policy, a young driver can avoid the high initial one-off fee that you would pay for standard cover. While there may be a deposit to pay for the black box, this will come nowhere near close to conventional fees.
As a young driver, telematics technology also gives you more control of the amount you have to pay for your cover over that year, as by limiting your mileage you can help to keep costs down. Importantly, even if you decide to go down the black box insurance route, it is still possible to accumulate a one-year no-claims discount. Having done this, you can use the savings made to help you afford a conventional car insurance policy the following year.
Black box car insurance may also benefit other groups of motorists who drive very few miles each year, such as experienced older drivers, as well as those who drive carefully and usually avoid driving in peak times or late at night. Equally, if you've previously made a car insurance claim, you may also benefit from opting for a black box insurance policy.
How else can black box insurance help?
As well as rewarding good drivers with lower premiums, black box technology may have other benefits. Insurers may start using the telemetry recorded by black boxes to ascertain who is to blame when an accident takes place. This, in turn, could help reduce fraudulent claims.
The black box for cars which is provided as part of the policy could also prove useful if a car is stolen, as police will be able to track the vehicle from the box.
Telematics technology is a safe and viable option for today's motorists, and there is now widespread speculation that this could become the future of motoring. Further, as the telematics system grows in popularity, the costs will come down through economies of scale, making this type of policy more attractive to a wider cross-section of motorists.
What are the disadvantages?
While black box insurance has been hailed as one of the only ways to obtain affordable car insurance for young drivers, novice motorists should be aware that some policies will cost more than traditional cover. This is why it is still so important to shop around - and not to automatically assume that a black box insurance policy will be cheaper.
And, telematics technology won't work for everyone. Drivers who have a higher annual mileage could end up paying more than they would for an ordinary policy.
In addition, drivers currently paying the cheapest premiums, such as middle-aged motorists with good driving records and full no-claims bonuses, are at present unlikely to find a telematics policy cheaper than their conventional cover.
Shop around for black box car insurance policies
When buying any car insurance policy, including a black box insurance policy, you need to do your research by shopping around.
