Wednesday , November 29 2023
insurance car telematics

Is Car Insurance Telematics Black Box Technology Penalising Good

InsuranceLecturer — Car Insurance telematics, often known as in-car black box technology, has been hailed this year as the panacea for all the ills of insuring young drivers and claims to offer this class of driver cheaper car insurance.

The technology works by having a “black box” fitted under the bonnet of the insured vehicle which measures the drivers performance and sends data using a variety of techniques, to the insurer for analysis and pricing.

Premiums are initially charged using known risk data and rating factors and then adjusted up or down over the course of the policy life. Many large car insurers have adopted the technology in a bid to win a larger share of this lucrative yet risky end of the market and in many cases premiums for young drivers have been reduced.

However questions are now starting to be asked about the accuracy of the data and the consequent pricing models.

The typical system works by measuring location defined by GPS, the time of day and certain performance related measurements for acceleration, speed, cornering and braking. A scoring method is applied to each of these criteria to determine the drivers performance and additional premium or future discounts are applied dependent upon these scores.

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Clients can then access their account either online or via a mobile phone app where they can see how well the insurance company thinks they drive and discover whether they will get a refund or be charged more. The customer application often known as a dashboard shows the drivers perceived peformance in a colour coded Green – Amber – Red layout with performance rated from 1 bad to 5 Angelic.

However many drivers are now complaining about the fairness of the system and the measurement and charging methods and this week the BBC Radio 4 consumer complaints program “You and Yours” reported on the growing number of dissatisfied drivers.

One particular interviewee a Mrs Bev Stainsby took out Co-operative car insurance at a cost of £1100 to cover herself and her young son using the telematics system. The car was driven for a short period of time by the youngster before he went away to university.

Since then the car has been driven exclusively by Mrs Stainsby who when she took over usage noticed that the dashboard scores were declining and further charges might have to be paid. She only uses the car to commute 20 miles per day on a straight road and was horrified to notice that the system was penalising her driving particularly for cornering and braking.

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She doesn’t trust the calibration of the telematics and upon enquiry was fobbed off by the insurer with the excuse that the scores are averaged over the year. A spokesperson for the company admitted that insurers adjust the basic system scoring against known data collected from its other drivers using the boxes, but defended the performance calibration. Mrs Stainsby is not happy! The program is available to listen to on BBC iplayer for a short period of time.

Steve Davis of online specialist car insurer said “Although the telematics driven policies can have benefits to both the driver and the insurer, the systems are still in their very early stages of development and there are some large concerns that customers should be made aware of. In particular the question of privacy”.

“The system allows insurance companies to completely profile your lifestyle, way beyond your driving skills. It allows them to see exactly where you go, who you visit, when you go out and also classifies you as a certain type of driver which may adversely affect you in the future.

Clearly there are problems with insurers adjusting the calibration scores and until a defined set of performance skill scoring is adopted across the industry, many drivers will be financially disadvantaged by belonging to the ‘wrong’ pool of drivers defined by a particular company’s dataset.”

“Furthermore, where multiple drivers have access to the same vehicle, the data cannot be trusted as a definition of risk and pricing anomalies are bound to occur”.

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