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How does black box car insurance work?

Black box insurance could help you become a safer driver, which in turn, could help lower your premium.

If you’re a high-risk driver, black box insurance might be a more suitable alternative to traditional car insurance.

What, then, is a black box and how does it work?

 

Black box insurance could help you become a safer driver, which in turn, could help lower your premium.

If you’re a high-risk driver, black box insurance might be a more suitable alternative to traditional car insurance.

What, then, is a black box and how does it work?

 

Daniel Hutson
From the Motor team
3
minute read
Do you know someone who could benefit from this article?
Posted 02 OCTOBER 2020

How does telematics work?

Telematics technologies record and transmit information about how you drive to your insurance provider, logging things like how hard you brake, how sharply you corner, how fast you go and the times of day you drive.

All these things are seen as indicators of how likely you are to have an accident and so how much of a risk you pose to the insurance provider. Low-risk drivers are seen as less likely to make a claim and are rewarded with cheaper car insurance.

Telematics works through a device installed in your car or phone app and uses GPS technology to monitor your driving.

Telematics data is often recorded using a small ‘black box’ fitted into your car – sometimes called a telematics box. Some providers make use of your phone or a device that plugs into your car’s power outlet (cigarette lighter).

Telematics, or black box insurance, could help you become a safer driver, which in turn, could help lower your premium. And if you’re a higher risk driver, such as a young driver or a driver with convictions, telematics insurance might be a suitable alternative to traditional car insurance.

What is the black box?

The actual black box is a small GPS device, about the size of a mobile phone, installed in your car.

As well as the black box, there are other types of telematics devices available, including:

  • Plug and drive – a simple device that plugs into your car’s 12-volt lighter socket, like an in-car smartphone charger.
  • Smartphone app – some insurance providers offer an app which can be downloaded to your smartphone without the need to install a device.

The type of telematics used depends on which policy you choose. If it’s a black box, an engineer approved by your insurance provider will need to install it.

Most insurance providers will want the black box fitted within a specified time from the start of the policy – usually at a time and place that’s most convenient for you. That might be at home, university or your workplace.

Who is telematics suitable for?

Telematics policies are typically aimed at young drivers. The idea is to encourage safe driving, which could also help young drivers get more affordable car insurance.

However, telematics can also provide the same benefits to other motorists who might be classed as high risk, including elderly drivers or drivers with convictions.

“Telematics is like having a driving instructor still with you”

Lauren Doncaster, 20, of March, Cambridgeshire, said:

“I got a telematics policy when I was 17 and had just started to drive. It was the only affordable choice.

“It was quite daunting knowing the insurers always knew what you were doing and feeling you needed to make sure you always did what you were supposed to.

“It did keep me on track and ensured I was always ultra-aware of how I was driving.

“I chose a policy that came with a box that attached to the windscreen; it fell off twice and I had to pay to get it replaced, which was annoying. I think I’d have been better off with one that was professionally fitted, though some of my friends had to take days off work for that so there are pros and cons.

“When I was 19, after two years of having a telematics policy, I got a policy without. I would have one again if it was significantly cheaper but there is a sense of relief in not feeling everything I am doing is being monitored.

“I knew someone who had their policy cancelled because they drove at significantly above the speed limit in a 30mph zone. It made me and everyone who knew him more aware of the risks of not sticking to the rules.

“Overall I do think telematics are a really good thing when you are a new driver. It’s a bit like having a driving instructor still sitting with you, reminding you what you need to do.”

How does telematics insurance work?

Once activated, your black box will collect information on how you drive and send it to your insurance provider. This will usually include information on:

Braking Speed Location
Steering Mileage Time of day
Cornering Journey length Number of journeys

These all affect the amount of risk you’re seen as posing to the insurance provider or how likely you are to make a claim. Other factors, such as your job title and make and model of your car are also taken into account in how car insurance premiums are calculated.

Regular severe braking or steering can be seen as signs of poor anticipation and poor driving.

Driving at night can be seen as riskier than driving in daylight. Though there are fewer journeys at night, 40% of collisions happen when it’s dark, according to the Royal Society for the Prevention of Accidents Driving at Night Factsheet.

Through telematics you’ll be able to see information on your driving via an online dashboard or app. In most cases, you’ll also get feedback, advice and tips based on your driving habits.

What are the benefits of telematics insurance?

Used correctly, telematics can offer benefits, including:

  • a discount on your premium for safe driving – insurance premiums can be more accurately tailored to you as an individual so you can be rewarded for good driving
  • helping encourage you to be a safer driver
  • GPS technology that can be used by emergency services to find your car, if there’s an accident or if it’s stolen
  • a quicker and smoother claims process – data collected by the black box can be used to process a claim and possibly establish who was at fault in an incident
  • helping young drivers get into good habits – evidence suggests young drivers are safer if their telematics data is shared with parents.

Telematics can also offer wider benefits, including fewer crashes and safer roads. Better information can help with things like encouraging car sharing, reducing congestion and giving information about accident black spots to help with road maintenance or layout changes.

How telematics helps clamp down on fraud

Fraudulent claims drive up the cost of motoring and insurance for everyone. Insurance providers are using telematics data to challenge fraud, for example to disprove dishonest claims about where accidents happened.

Businesses also sometimes use telematics to contest speeding tickets or false insurance claims made against them.

A report published by the Association of British Insurers (ABI) in 2019, said motor insurance scams are the most common type of insurance fraud. In 2018, 55,000 dishonest claims worth £629 million were detected.

Across all types of insurance,1,300 fraudulent claims are exposed every day and two fraudsters per week are convicted of fraud, the ABI report said. The average fraudulent claim is £12,000.

Detective Chief Inspector Andrew Fyfe, Head of the City of London Police’s Insurance Fraud Enforcement Department, said: “The actions of insurance fraudsters increases premiums for honest customers and costs the insurance industry millions of pounds a year.”

“A telematics policy was cheaper”

Haleema Hussain, 25, of Peterborough, said:

“I got a telematics policy for my first year of driving because it was cheaper."

“To begin with, I was very conscious of being monitored and it made me a bit hyper-aware and therefore a bit more of a nervous driver.

“At times I found myself thinking too much about not braking too harshly as the box would pick it up, or thinking I can't overtake a vehicle on the dual carriageway due to the extra speed needed for that.

“I had an app which kept me up to date with my driving 'score' which was quite good to build confidence.

“I feel like it’s a bit of a shame that the insurance premium is so sky high at the start – it makes getting on the road initially very difficult. In that sense I believe the telematics cover is a godsend in all honesty.

“It allows new drivers to monitor their driving and keep within speed limits, ultimately leading to them being safer.”

Are there any disadvantages to telematics insurance?

There could be some drawbacks, depending on your policy. For example:

  • some insurance providers may charge for installing, cancelling or removing the black box
  • some policies have restrictions like mileage limits and curfews
  • you could be penalised for bad driving, which could mean a higher premium
  • some insurance providers only offer a discount on renewal, so you may have to wait for a year until you benefit from your safe driving
  • if you had a policy cancelled because of poor driving, you’re likely to be asked to declare that to other insurance providers when getting quotes in the future. Your premiums may be permanently higher or you may find it more difficult to get someone to insure you if you have a bad driving record.
  • insurance providers don’t share data on your driving – if you have a good record and switch to a different provider you may have to build up your driving data again.
  • the technology isn’t infallible. There have been some cases where inaccurate readings have led to complaints by motorists.

Always read the terms and conditions of your telematics policy carefully to understand exactly what limits and restrictions there are.

What’s a fair price for car insurance?

When you’re trying to assess whether or not a telematics policy is good value for money for you and your car, it pays to know what you should expect to be paying for insurance.

As of August 2020, Compare the Market data shows the average motorist paid £695 for their car insurance, down from £709 in June 2020 and £711.77 in June 2019.

Our regular Motor Snapshot demonstrates how this differs depending on your location in the UK and age.

This is how insurance costs compared in different regions recently:

Region Jun-20 Jun-19 YoY Change YoY%
East Anglia £655.57 £662.53 -£6.96 -1%
East Midlands £667.04 £673.48 -£6.43 -1%
Greater London £1,089.07 £1,073.81 £15.26 -1%
North East £662.56 £662.79 -£0.23 0%
North West £807.54 £813.34 -£5.81 -1%
Northern Ireland £712.70 £716.55 -£3.85 -1%
Scotland £574.33 £568.69 £5.64 -1%
South East £635.59 £646.81 -£11.22 -2%
South West £535.90 £549.85 -£13.95 -3%
Wales £588.59 £625.77 -£37.18 -6%
West Midlands £793.09 £799.84 -£6.76 -1%
Yorkshire and The Humber £775.83 £760.99 £14.84 2%

 

Faulty telematics systems

In early 2020, one insurance provider faced criticism after claims from motorists that their phone-linked telematics app was recording journeys when they were cycling or on a train and penalising them for it. One driver also said the app was failing to connect and record her journeys. This led to the policy being cancelled and her having to pay a much larger premium. The company moved to quickly address the issue.

Father and son’s views - what we really think of telematics

“My speed score dropped when I hadn’t broken the limit”

Oliver Hardesty, 18, of Louth, Lincolnshire, said: “I've had a black box fitted to my first car.

“The benefits have been a reduced insurance premium and the promise of my year two premium being lower still if I perform well. It was easy to arrange and to get it fitted.

“On the negative side, I get scored down if I stay out after 10pm, my mates take the mickey out of me for having it and the system stops me enjoying the performance of my car, within the law.

“It was frustrating when my speed score dropped 20 points in one day when I hadn’t broken a speed limit.”


“Telematics gives extra reassurance for the safety of my son and staff”


Oliver’s dad Richard Hardesty, 47, said: “As a parent with my son out in his first car, I find it reassuring to be able to view his performance and I think it does encourage good driving. But I don’t have total faith that the scoring is 100% accurate, which seems unfair.

“For me that reassurance is great that he is being really conscious for the first year at least. Nobody is perfect when they’re driving but hopefully it’ll give him the view that he will continue that good driving practice. It’s so easy to be tempted when you’re driving around with your mates and get sucked into it.

“Our office pool car also has a tracker fitted and I can view employee performance in an app. It was a difficult sell for staff who didn’t like the thought of being monitored. Over time they are not so bothered about it and it has improved people’s driving behaviour.

“There were multiple occurrences of considerable speed (limit) breaking initially, but now it is very rare. It’s for their benefit to think about their driving and make sure they get home safe.”

Is telematics insurance cheaper than traditional car insurance?

Telematics insurance won’t necessarily be cheaper than traditional car insurance, but in some cases it will, especially for younger drivers. It’s a good idea to shop around and compare a range of quotes.

Compare the Market research from June 2020 to September 2020 showed just under 70% of drivers aged between 17 and 20 could save on their insurance by choosing a telematics policy.

If you’re looking for affordable telematics or traditional car insurance, compare with us to see if you can find a cheaper deal.

"My telematics app recorded a journey I did on foot!"

Josh Wilkin, 23, of Nottingham, said:

“I currently have a telematics policy. This is the first car I’ve had of my own and telematics made it much more affordable.

“Rather than having an installed black box in my car, mine works via my phone and a sticker on my windshield.

“I understand why some people feel it’s a bit Big Brother, but definitely when I first got back into driving, after a break at uni, it forced me to be more aware of my speed and how I was driving. Now it’s not something I necessarily even think about.

“Having to be a bit under the cosh for a couple of years to get your premiums down to a more affordable level isn’t the end of the world.

“I have had a few technical issues with the Bluetooth dropping in and out and it is a bit of a worry that could impact on things. You don’t want that to reflect on you as a driver.

“I also sometimes have concerns about how much variation there can be as to what constitutes safe driving. It’s not all like it is with speed limits where it’s clear cut that you’re either within the speed limit or not.

“So far, all my driving scores have been good. My insurer provides little rewards, like a free coffee, when your score is green, which is nice.

“I did have one issue where I got a report through my app for a journey I’d done on foot. My speed rating was really good but it said the cornering wasn’t! That would be a bit of a worry if it kept happening, but the insurance company has patched that issue now.”

‘Black boxes’ to be mandatory in new cars by 2022

It looks likely that electronic data recorders will be mandatory in all new cars in the UK and Europe by 2022.

The systems will record information before, during and after a collision for use in accident investigations.

The European Union has voted for various new safety features to be installed in new cars. These include devices to stop people exceeding the speed limit and automated emergency braking. The UK has indicated it will adopt the same rules, according to media reports.

The Guardian said: “Safety campaigners described the move as one of the biggest leaps forward in 50 years and said it could save 25,000 lives by 2037.”

There may also soon be rules preventing insurers from refusing to share data on a drivers’ behaviour with other insurance providers if a motorist wants it to be shared to help them get a cheaper quote.

The UK is exploring ‘Smart Data’ initiatives that would empower customers to give permission to third party providers to access their own data.

This is similar to Open Banking regulation in the UK which is already enabling customers to give access to third parties to their transaction data which banks would traditionally only have access to, thereby enabling more competition in the financial products market. Something similar may happen with telematics, to allow customers to access data collected by one telematics provider to help them get a cheaper insurance quote elsewhere

The Department for Transport has funded a Telematics Road Safety report to help plot ‘road risk’.

In a study that has a slight air of the 2002 science fiction film Minority Report - in which investigators predict and prevent future crimes - telematics technology developer The Floow is using data from motorists’ driving behaviour to identify places where there is raised risk of a road accident.

Regular sharp braking at a particular spot, could indicate a problem with the road condition or signs, for example.

But there’s a lack of foresight in the UK over the broader potential uses of telematics, according to separate research carried out by The Floow.

It shows the majority of insurance decision makers in the UK focus on telematics’ ability to improve risk modelling for high-risk drivers and reduce insurance premiums for motorists.

A Fintech Times report of the survey said that insurance decision makers in Europe and the UK see the advantages of telematics as being:

  • reducing insurance premiums for drivers (European respondents 34%, UK 40%)
  • providing data to encourage car sharing, (European respondents 43%, UK 20%)
  • improving the insurance industry’s understanding of mobility (European respondents 38%, UK 20%)
  • managing traffic congestion (European respondents 34%, UK 18%).

In the report, The Floow Chief Operating Officer David James says: “Our findings reveal differences in how insurers around the world quantify the value of telematics. Whilst those in mainland Europe are leaving no stone unturned, it appears that decision makers in the UK insurance industry are yet to look beyond the impact on insurance premiums.”

Telematics myths and misconceptions

You might’ve heard various myths about telematics. Is there any truth in them? Here are the facts:

Will I be fined for underestimating my mileage with a telematics policy?

You won’t be ‘fined’ for underestimating your mileage but if you drive more than you were expecting to when you took the policy out you may have to pay more. That’s not specific to a telematics policy though.

Most personal car insurance policy providers require motorists to estimate the number of miles they’ll drive in a year and your insurance quote will be partially influenced by that. That is because the number of miles you drive influences how likely it is that you’ll have a collision and need to make a claim.

Telematics will record the number of miles driven. If you’re about to exceed your estimated miles for the year, your policy provider is likely to get in touch and may charge an additional premium.

If you don’t have a telematics policy, but it’s found you significantly exceeded the amount of miles you estimated you’d drive in the year, it could invalidate your insurance policy. It’s important to always be as honest as possible about how many miles you expect to drive in a year and if your circumstances change and you’re driving significantly more or less, to let your insurance provider know.

During the 2020 coronavirus outbreak when people were asked to stay at home and many were not driving at all, some insurance providers offered partial refunds as motorists' mileage significantly reduced.

Can I drive at night with telematics?

Some telematics policies require you to agree not to drive at certain times of the day that are seen as high risk, such as at night, but it is not the case for all of them.

Choosing a telematics policy with a curfew might be one way of getting a cheaper policy.

If you want or need to have the flexibility to drive at all times, you can still opt for a telematics policy, but just need to make sure it isn’t one that has a curfew attached. You can check when you get quotes.

Will I be fined for braking heavily or cornering too sharply?

You won’t be ‘fined’ or penalised by your telematics insurance policy provider for occasionally braking heavily, cornering sharply, speeding or any other driving behaviour.

Telematics records all these things to build a general picture of your driving style. The aim is to encourage and reward safe driving – which generally involves smooth braking.

Unexpected things happen on the roads and sometimes an emergency stop or sharp brake is the right thing to do

It’s only drivers who consistently behave in a way that indicates bad or dangerous driving who will see their premiums go up. In the most severe cases, a driver could have their policy cancelled.

Most telematics policies allow you some access to the data being recorded about your driving so that you can monitor how you’re getting on. There may even be tips for things you can do to get even better, such as allowing an appropriate gap between you and the car in front to reduce the need for sharp braking.

Do I need to wait for a black box to be fitted before I can drive my car?

Most insurance providers won’t require you to wait until the black box is installed before covering you to drive, but it’s best to check to be sure.

Will the police be informed if I go over the speed limit?

In simple terms, no, this will not happen. Police would only get access to your telematics data if they asked for it as part of a formal investigation and legal permission was in place to allow them to access it.

Telematics data can only be used in the ways agreed with you at the beginning of the policy.

It is intended to record driving styles so good driving can be rewarded rather than to prosecute mistakes.

That said, telematics has played a role in court cases and data can be shared if a police inquiry is made. Here are some examples.

Telematics helped to solve murder case

The built-in telematics system of a Land Rover helped police in North Wales solve a murder.

It remained intact despite the Land Rover being burned out and helped to place the vehicle at the murder scene.

That, combined with other evidence, was used to convict a man of the killing.

Telematics used in case against police officer

A Norfolk police officer was taken to court accused of abusing his position by speeding at 122mph through rush hour traffic and skipping red lights on a personal errand. Telematics formed part of the evidence.

The officer was cleared after he successfully showed he had used the journey as an opportunity to complete mandatory requirements to practice driving under emergency conditions.

Telematics proved innocence of motorist

Telematics evidence was used in a court case to help demonstrate that a policyholder was not responsible for a collision.

Wandsworth County Court accepted that the telematics data backed up the policyholder’s version of events.

Insurance companies regularly use telematics to challenge claims of fault against their policyholders, but it’s unusual for these cases to go to court.

Do insurance providers use telematics to increase your insurance costs?

More than two thirds of young drivers get cheaper insurance by choosing a telematics policy.

Insurance companies use telematics to better tailor your insurance premiums to your own driving behaviour rather than you being penalised because you fall into a high-risk group - such as young drivers.

The cost of insurance would usually only increase when you renew based on telematics data if you’d shown persistent worrying or bad driving behaviour. If you’re a careful and sensible driver, you’re likely to benefit from reduced premiums.

Are telematics policies only for young drivers?

No! Telematics insurance policies may also offer savings for older or high risk drivers, like those with points on their licence.

We found that telematics policies were the most affordable option for 16.99% of 30 to 39 year-olds, based on quotes compared through Compare the Market between the beginning of June 2020 and September 2020. 6.20% of 50-64 year olds also found a black box policy was the cheaper option.

Telematics was the cheapest option for 68.90% of 17-20 year olds.

Will my insurance provider track my whereabouts?

Your insurance provider can only legally use the data collected by the telematics technology in the way agreed under the terms of your policy – and they can’t share it either.

Your insurer will collect data on how far you travel and when journeys take place to assess the risk posed by your driving behaviour, but they’re not interested in monitoring your movements.

In some cases, telematics can be used to help find your car if it’s stolen or to pinpoint your location if you need emergency help.

Will I be able to drive another car if I have a telematics policy?

Whether your insurance covers you to drive other vehicles varies from policy to policy. Often it’s the case that your policy only covers you to drive the vehicle named on it.

There’s nothing to stop you driving a different car under a different policy. But before you do, you must check your policy or contact your insurance provider to make sure you’re covered.

What impact does it have on my telematics policy if someone else drives my car?

If someone else drives your car it could have positive or negative consequences for your driving score and therefore your insurance premiums.

Most telematics technology can’t be switched off if someone else is driving the car so it will record the data as if you’re the driver. If an experienced driver uses your car and drives well, this may help. Insurance providers often give reduced premiums on insurance policies where an experienced person is a second driver. This is because it’s considered that the risk of a collision and claim is lower when they’re using the vehicle. Check the details of your policy to make sure you’re within the terms of your agreement with your telematics provider.

For answers to more frequently asked questions see our
black box insurance page.

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