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Black box car insurance: an option for high risk or low mileage drivers

You probably thought only airplanes can have a black box, that device which records everything that goes on in the cockpit. Now, there is also the ‘black box’ car insurance that will have the same function for drivers on land. The only question is, will there be a significant improvement on road safety or will it only drive insurance premiums higher?

All about 'black box' car insurance

Definition

Simply put, ‘black box’ car insurance is an insurance product type that involves the fitting and use of a GPS or a sat nav to determine the risks and potentials of a driver seeking coverage. However, the data that can be collected through the GPS can vary and is usually determined by the insurance company.

Risk potential

1. Speed and velocity

A sat nav system tracks the speed at which the car is travelling. It can actually gather data to see if the driver is prudent or reckless.

2. Braking and stops

Equally, a driver who brakes abruptly too often can be a potential risk to himself and other motorists and might be prone to cause accidents because of such driving behaviour.

3. Mileage

Insurance companies can also collect figures on the length of time an insurer is on the road and the mileage the driver does in a day, week, month or year. Hence, a driver who has a high mileage might be asked to pay a higher insurance premium. In addition, driving during the night or day frequently has also a bearing on the amounts of premiums.

4. Location

Knowing where the car is parked and where it is in current times, also help insurance companies in assessing the risk factor of a car insurer.

Issues

The ‘black box’ car insurance is also called a telematics car insurance. Whatever name it is known, it is an insurance product that will include collection and aggregation of driving and car data to help insurance companies define their risks. Privacy of data and higher insurance premiums due to driving habits are potential concerns associated with this type of coverage. However, careful and low mileage drivers can stand to benefit from this kind of insurance.

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