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Pay-how-you-drive car insurance

An L plate on a blue carMore insurers are offering telematics or "black box" devices which monitor driver behaviour and cuts car cover accordingly. Is this the future for cheaper car insurance?

Telematics or "black box" technology monitors driving behaviour, such as acceleration and braking.

By demonstrating responsible driving through this sort of monitoring, it is possible for young drivers to prove to car insurers that they present a low risk, and insurance premiums may be adjusted accordingly.

AA Insurance is the latest to offer telematics-based insurance with the launch of AA Drivesafe.

How it works

This involves a black box, about the size of a packet of playing cards, being installed in the car to measure speed, braking and cornering, types of road travelled on, and time of day.

Drivers are able to log in online and monitor their driving skills. The data is also sent via satellite to AA Insurance which can then set car insurance premiums accordingly.

The launch comes at a time when the cost of young driver car insurance continues to soar due to their higher risk of accidents on the road.

One in four people killed or seriously injured in a road crash is a young driver or one of their passengers.

Yet drivers under the age of 25 account for only 12 per cent of all driving licence holders, according to the Association of British Insurers .

High cost of car cover

Young male drivers are especially at risk, being five times more likely to be involved in a crash than male drivers aged 30 to 59.

The average cost of a comprehensive policy for young drivers, aged 17 to 20 is £2,590 - more than three times the national average of £844.

And drivers aged 21 to 25 pay a typical £1,474 a year, according to the latest Confused.com car insurance price index.

But the AA says its pay-how-you-drive car insurance could save customers up to £850 a year compared with standard young driver policies. 

Rewarding responsible driving

Simon Douglas, director of AA Insurance, says: "The system provides a genuine opportunity for users to improve their driving safety and so reduce the cost of their cover by proving themselves to be responsible drivers.

"It's designed to encourage users to anticipate road conditions and drive in a way that properly reflects a lowered risk of having an accident."

Drivers are quoted an average cost for their annual premium at the start of the policy, and safer drivers could see their premiums fall after just 60 days.

But those who take frequent risks – speeding and braking heavily, for example - are likely to see their premiums rise.

Benefits for all drivers

While this technology will be especially attractive to young and newly qualified drivers, it could benefit anyone who faces high insurance premiums, says Douglas.

AA Drivesafe will be available through Confused.com from the end of February.

But there are a number of other insurers offering telematics insurance, including Autosaint and Coverbox – both available through Confused.com.

The Co-operative, Insurethebox.com and iKube also offer telematics-based insurance.

Admiral launch

Admiral, the parent company of Confused.com, is currently trialling the technology with a view to a full launch later this year.

Gunnar Peters of Admiral Insurance says: "Currently, an 18-year-old can actually be as good a driver as a 30-year-old but would get higher premiums due to standard risk ratings.

"But telematics allows insurers to offer premiums that reflect an individual driver’s actual risk on the road."




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Naphtalia Loderick

Naphtalia Loderick

Naphtalia Loderick covers all things consumer for Confused.com. She started out on a weekly newspaper, via a national news agency and a stint in the fun but ‘not as glamorous as it appears on screen’ world of TV at the BBC researching consumer films for The One Show.

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