Telematics devices are all the rage with car insurance companies. They promise that if you install a little gadget in your car, you’ll get discounts galore on your monthly premiums. But do these gadgets really save you money? Perhaps not.
In a recent Forbes article, Adam Tanner revealed that many insurance companies will use the data gathered by telematics devices to adjust insurance rates — both for discounts and increases.
How Telematics Devices Work
Wired into the dashboard of your vehicle, these little devices collect real-time information when your vehicle is in use. Data collected could include speed, distance travelled, direction the vehicle is heading, the presence of objects in close proximity to the vehicle, and whether the vehicle makes sudden stops, starts, or direction changes. (That means doing donuts in that empty parking lot isn’t such a good idea once the telematics device is installed, even if no one is around.)
Your insurance company uses the data to help determine your driving patterns and can set your insurance premiums based on THEIR analysis of that data. That’s right, how they interpret the data is entirely up to them. You don’t even have to be made aware of the parameters used to determine your status.
The Drawbacks of Telematics Devices
Even if you’re generally a good, safe driver, your telematics device will serve as a tattle tale for that one race to beat a yellow light, or that one time you sped all the way to a meeting you were late for. If you’re not careful, even one poor decision can lead to insurance hikes.
And what happens when your teenager asks to borrow the family car? Does the device know the difference between drivers? Can you imagine the fall out if several of your teenage son’s friends took your car for a joyride one night? There’s no way to shut off when a telematics device collects information — and no way to indicate the presence of a new driver. That’s because your insurance covers the vehicle and the driver.
If someone borrows your car and is involved in an accident, the insurance company covering the car AND the insurance company covering the driver may both be liable for damages. Be careful whom you lend your car to, or your insurance premiums could skyrocket.
Furthermore, if your accident goes to court, the information on the device could be subpoenaed and used against you. Additional data on the device could also be used to establish a pattern of bad driving habits that could sway the case if evidence is inconclusive.
What do you think? Are you confident enough in your driving habits to install a telematics device for discounted monthly premiums? If you’ve had a device installed already, how has your experience been?