With Car Insurance Prices Increasing, Do We All Need a Little 'Black Box'?
posted on Apr 12 2016 by Karen Liggett
Car insurance premiums have increased 13 per cent in the past year to an annual average of £683, with over-50s drivers the worst hit, while 'black box' technology becoming popular with young drivers for cutting the price.
According to market research from Consumer Intelligence, car insurance price rises have increased in the past six months due to a hike in the Government's Insurance Premium Tax (IPT). Last year, the standard rate of IPT (the tax paid each time an insurance policy is purchased in the UK) rose from 6 per cent to 9.5 per cent.
Over-50s drivers have seen the biggest rises - up 15.3 per cent - taking their average premiums to £298, while under-25s have seen prices rise 9.3 per cent. However older drivers still pay considerably less than younger drivers - with the average premium for under-25s standing at £1,600.
To help with this price increase a new technology called telematics - a so-called 'black box' technology - can potentially reward good driving behaviour with lower prices. The black box - which is put in a car - allows insurers to spy on how people drive, a policy which can save the young over £1,000 a year.
A telematics policy requires the motorist to have a device installed within the vehicle. Its purpose is to monitor parameters such as: how many miles it covers, whether it is required during more hazardous times of day such as rush hour, and whether the motorist's driving style is safe and smooth or hard and aggressive.
This enables the insurance company to tweak the monthly premium up/down based on specific, indisputable, facts. In other words, sensible behaviour is financially rewarded and irresponsible behaviour penalised. The policy holder has control of his/her fate. In contrast, a traditional, non-telematics, insurance premium is based on more generic parameters. For example, an insurer might conclude that the average 21 year old male is very inexperienced and over confident. That is reflected in the premium of every 21 year old male; irrespective of experience, capability and attitude.
The British Insurance Brokers’ Association surveyed telematics providers to confirm the number of live polices in the United Kingdom. During March 2016, there were 455,000 compared to only 323,000 in December 2014. That represents an increase of about 40%.
The Association confirmed: “These types of policies can offer savings of up to 25% for careful drivers. In particular, young drivers who often struggle to find affordable cover can save over £1,000”.
Executive Director Graeme Trudgill explained: “Telematics is becoming the motor insurance solution of choice among young drivers.” He continued: “They can take control of their own premiums by electing to have their driving behaviour monitored.”
Furthermore: “Industry statistics show there is a 40% drop in crash risk when a new driver has a telematics policy. Telematics equipment also helps reduce theft claims (with) many doubling as vehicle tracker devices.”
Mr Trudgill concluded: “We are delighted to see these figures increasing (as) the benefits of a greater take-up of telematics technology are many.” He argued the advantages include: lower premiums, safer roads, and a reduction in the number of uninsured drivers.