What is telematics or usage-based insurance?
Telematics, also known as usage-based insurance, uses monitoring devices and technologies to track and report driving and vehicle movements in real-time. Insurers use telematics to measure mileage and driving habits. This can help determine if a policyholder qualifies for discounts on their premiums or other incentives for safe driving. Telematics can be used for personal auto insurance policies, as well as commercial auto insurance, fleet insurance, and logistics.
Here’s how it works.
There are a variety of technologies and devices used for capturing telematics data. For example, tracking equipment may be pre-installed by a vehicle manufacturer or available on a mobile app, Bluetooth beacon, or plug-in device on a vehicle’s onboard diagnostics (OBD) port. A telematics device can track the driver’s GPS location, mileage, fuel consumption, and time of day. Additionally, it can give insight into driving behaviors such as rapid acceleration, hard braking, speed, and distracted driving.
Telematics have advantages for drivers.
Using telematics can be beneficial for the insurance company. For example, it can help identify attempts at insurance fraud and gain insights on demographics and markets. Policyholders sometimes argue that telematics makes them feel like they’re being watched or someone’s trying to catch them driving badly. However, there are many benefits for drivers when telematics are used. Some advantages include: