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How a ‘black box’ means cheaper car insurance for young drivers

 Young motorists are being priced off the roads after motor insurance costs hit record highs for the 17 to 25 age group. But one insurer says it has the solution – a black box. We explain how it claims it could knock as much as £300 a year off premiums.

Young drivers have been thrown a lifeline in the battle against soaring motor insurance costs after one of Britain’s biggest insurers launched a new Smartbox that will monitor how they drive and reward safe motoring with cheaper premiums.

The Co-operative announced what it describes as “a car insurance revolution” last week and says that the new, “pay how you drive” system will be, on average, £328 a year cheaper than other insurance policies aimed at 17 to 25-year-olds. The firm believes that more than three-quarters of young drivers could make a saving.

The launch comes as young drivers face higher motor insurance premiums, with further rises expected after the recent European Court of Justice (ECJ) ruling recently ruled that it will ban companies from using gender to set insurance premiums.
What is a Smartbox?

The technology is built into a small black box, which will be fitted into the car of any young driver who takes a Co-operative insurance policy. The box will be out of sight, usually under the bonnet and is fully tamper-proof.

It uses GPS and G-force technology to monitor driver behavior such as braking and acceleration, cornering, general speed and whether they drive during the day or at night.

Good driving will be rewarded with car insurance discounts and bad driving will be penalised and premiums could rise.

Information is transmitted by the Smartbox back to the insurer so a report can be put together to show how well or how badly an individual has been driving.

Premiums recalculated every 90 days

Unlike traditional insurance, which remains at a fixed quoted price for a whole year, the pay-how-you-drive-system is recalculated every 90 days.

So if a young motorist has been driving recklessly they could be in for an increased premium, of up to 15 per cent, but good driving will be rewarded with discounts up to a maximum of 11 per cent on the initial price.

In practice, payments work like this. You pay the annual policy up-front or in monthly installments like any other motor insurance policy. The insurer will then reimburse you if you’re eligible for any discounts after 90 days good driving. Equally though, it will raise your payments or collect more money from you if you receive penalties for bad driving. 

Your driving habits monitored online

As well as regular recalculations the technology will allow drivers to see the data from the boxes every day. Daily reports will be available through the online “Driving Dashboard” which policyholders will access using a password.

It gives advice on what they can do to improve their driving. Each type of behaviour is illustrated by a speed dial and drivers will be rated on a green (good driving), amber (generally good but showing some bad behaviour) and red (bad driving).

A driving alert will also be sent out every 45 days to warn of any bad driving that might need attention before the 90 day recalculation.

The policy is also designed to act tough on bad drivers. If a motorist is seen to be driving in a manner so reckless that it would result in a ban if the police caught them then the Cooperative reserves the right to cancel their policy with just nine days’ notice.

Likewise, if a driver speeds then an email will be sent out with a warning to remind them that this behavior constitutes bad driving.

Is the technology a UK first?

Smartbox Telemetric technology, or telematics ) as it’s also known, already exists in Britain and some mainstream insurers offer policies based on pay-as-you-drive so mileage would be capped, for example, or speed would be monitored. (Read more on telematics here.)

But the Smartbox is the first scheme to link driving behaviour to cheaper car insurance premiums.

Is it available to all drivers?

At the moment the black box insurance is just for young drivers between the age of 17 and 25 because this is the age bracket most affected by car insurance price rises.

The hikes are related to statistics which show that young drivers are involved in a high proportion of deaths and serious injuries on the roads. According to road safety charity Brake in the UK, an 18-year-old driver is more than three times as likely to be involved in a crash as a 48 year old, therefore tarring all young drivers with the “high risk” brush.

David Neave, director of general insurance at the Co-operative Insurance, said: “To ensure we do not end up with an entire generation priced out of car ownership we are giving them a chance to prove themselves as responsible drivers, and dispel the assumption that all young drivers will drive badly and have accidents.

“By using the Smartbox telematics technology we can actually see how a young driver behaves behind the wheel. This innovative technology will ensure that young drivers are given access to fairly priced motor insurance, with the added bonus that the better their driving, the bigger the safer driving discount.”

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