Britain’s insurers have this week published a guide to help motorists who are considering signing up for a pay-how-you-drive car insurance policy.
Policies which reward customers for being careful and sensible behind the wheel – also known as telematics insurance – have soared in popularity in recent months.
Boon for young drivers
Young people in particular view them as a way to fight back against the huge rises in the cost of cover of the last few years.
The new pay-how-you-drive motor insurance guide has been jointly published by the Association of British Insurers (ABI) and the British Insurance Brokers Association (BIBA).
They say it is designed to help consumers decide whether a telematics policy is right for them.
The ABI’s Kate Carr said: "Pay-how-you-drive policies have the potential to dramatically change the motor insurance market.
"They have been developed to recognise and reward good driving behaviour through lower motor insurance premiums, and to encourage safer driving generally."
Telematics insurance uses a black-box device installed in the customer’s car to monitor factors such as speed, braking, cornering and the time of day the vehicle is being driven.
The information collected is fed back to the insurer, which usually sets premiums accordingly.
Those found to be driving recklessly, for example, may be warned that they face higher costs unless they change their style.
The guide points out that "safer" drivers may not always be rewarded with discounts on their premiums straight away.
Freedom to drive more
In some cases, it adds, those found to be driving sensibly may be given a higher annual mileage limit instead.
This means they can use their cars more without paying extra for cover as would normally be the case.
In other cases, careful drivers may only be given discounts or cheaper car insurance quotes when they come to renew their policies.
The guide also says that telematics policies will not necessarily be cheaper than traditional cover.
Those who need to drive at night, for example, when accidents are more frequent, are likely to be penalised by pay-how-you-drive insurance.
And the organisations warn that such policies apply to the car, not the main driver, so the behaviour of any of the vehicle’s other users will also be taken into account by the insurer.
One concern many people have with telematics policies regards the data collected by the insurer.
Fears have been raised that police could use speeding information from a telematics box as the basis of a prosecution.
However, the ABI and BIBA say that insurers will not share such data with any authorities "unless they are forced to do so by a court order" or unless the customer has given permission for the company to do so.
The guide adds that the GPS-enabled black box can make it easier to track down your vehicle if it is stolen.
It can also provide vital information to the emergency services in the event of an accident.
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