Black Box Insurance. What Is It?

Black box car insurance

Black Box Insurance is a unique type of insurance which offers drivers a great deal of flexibility. The flexibility is related to how much a driver is able to pay, or wants to pay each month in the form of a premium. The uniqueness comes from the ability to reward drivers for exhibiting safe and proper driving habits. Monthly premium cost is not based on historical statistical data. The rates for demographic groups are completely left behind, as this type of insurance is revolutionary in the car insurance industry.

Black box Insurance is also known by several different names. They are: Telematics, Smartbox, GPS based, Pay as you drive and Usage Based. This type of car insurance is able to offer a benefit which has not been offered in the past. Insurance companies now have a clear, black and white idea of exactly how a driver is cornering, braking and recognizing and following speed limits.

Black box car insurance involves a small device mounted to the car by the insurance company. This device is about the size of a mobile phone and does not affect the warranty on the car in any way. Nor does the device inflict any damage on the car. The device uses a small amount of energy which should not drain the battery in the car.

Driving Habits Monitored by the Device

black box insurance

The data which is recorded by the device is done so using GPS technology. Information in the form of a signal is sent from the device to a space satellite and then back to the insurance company equipment. The insurance company is able to see detailed information about the car quickly and easily.

  • Speed of the car
  • The distance the car has traveled
  • Times of the day or night the car has been driven
  • The types of roads the car has travelled on
  • The location of the car
  • Detailed information about what the car has done before and after an accident
  • How safely or poorly the driver has been braking in the car
  • The force at which a car was involved in an accident

Ways the Data is Used

Black box insurance is offered by more and more insurance companies. The driver data information is used in varied ways depending on the scheme. In order to keep costs to a minimum, the best scheme for one’s driving pattern needs to be carefully matched.

Conditions of driving include:

  • Charging higher rates for use during rush hours
  • Charges will be higher for those who drive between the hours of 11pm and 6pm, especially on the weekend nights
  • Charging lower mileage rates for drivers who brake safely and carefully follow speed limits
  • Charging higher mileage rates on especially hazardous roads

Cost of the Car Insurance

Pricing includes the following generalities:

  • Companies may charge for removal of the small device on termination of insurance, some remove it for free and others leave it in
  • An initial premium cost which varies among the insurance companies
  • Some companies will only be interested in keeping young drivers off the road during night-time hours
  • A possible cost for the recording device to be mounted in the car
  • When a car changes owners, the box may be left in place to allow a new owner to benefit from it
  • Mileage rates increase and decrease depending on where and when trips are made
  • Reducing or increasing the renewal annual premium may be offered depending on the driver's risk profile based on recorded driving behavior through the year
  • Some companies offer mid-term cash back for those who have been proven to be low risk drivers

Advantages of Black Box Insurance

UK Police Car

Advantages of these schemes are to both low and high risk drivers, for example:

  • Those who drive fewer miles and during times which are non-commuter times will be benefitted by lower cost
  • Young male drivers are more likely to have accidents and 2 of every 5 of all serious and fatal accidents occur between 11pm and 6am. Keeping young drivers off the road during these periods is advantageous to insurers. They can reduce their risk and young drivers can benefit from lower insurance costs. When the car is driven at night, a higher cost is applied due to the greater risk of an accident happening during those hours
  • Provides the ability to easily locate a stolen car in the event of a crime
  • Support with regard to claims management, should an accident occur because the insurance company can investigate the incident
  • Safer drivers will build up a history of data to prove it. They will also benefit from reduced per mile charges. Despite the predicted rise in insurance premiums for young drivers, especially girls, the gender can build proof of a pattern of good driving to keep their premiums low
  • An easier process of recovery of funds due from third parties, through provision of proof of accident scenarios

Additional advantages include online dashboard reporting which allows a driver to:

  • Calculate what type of driving increases your risk, helping you drive safer
  • Store all documents online and access them at any time
  • Enables a driver to see how they are driving in the most mileage efficient way
  • Monitor the total amount of mileage driven and therefore cost

The Disadvantages Of Black Box Insurance

Some disadvantages exist with this type of car insurance. For those drivers who drive consistently faster than the speed limit or drive at times which are considered rush hour, the insurance would not offer advantages.