Insurance companies have used vehicle telematics for about two decades now as a way to bring more transparency and accountability to auto policyholders. Telematics are most commonly associated with the little modules that plug into your car’s Onboard Diagnostics Port (OBD-II), which relay driving data to insurance providers. Today, many insurance companies offer plug-and-play solutions and even apps that eliminate the need for modules altogether.
Unfortunately, this technology has been met with a lot of confusion, and drivers have developed a number of widespread misconceptions. Some people might not quite understand how telematics function, so they make comparisons to other technologies that just aren’t accurate. Here are a few of the most common myths:
- They track your every movement. Telematics and GPS aren’t the same, which means your vehicle module isn’t tracking your whereabouts. Instead of monitoring positioning and movement like a GPS tracker would, a telematics module is collecting information such as speed, fuel economy, vehicle condition, airbag deployment, and more.
- They void your warranty and cause problems. Telematics modules will not void your warranty or cause problems for your vehicle in any way. Plugging one in doesn’t constitute tampering with or modifying your vehicle, and the sensors your insurance company provides are approved for use by automakers, as long as they meet OBD-II standards.
- Using telematics means your insurance company doesn’t trust you. There’s no question of trust when it comes to telematics. Most telematics programs are opt-in and used primarily for gleaning data from large groups of customers as a way to write better policies in the future.
With these common myths and misconceptions out of the way, it’s important to look at how vehicle telematics actually work and how the data they provide can benefit both drivers and insurance providers.
How does it work and who benefits?
As mentioned, vehicle telematics are concerned with collecting data about policyholders’ driving habits. Each insurance company tracks its own proprietary data. However, most are concerned with the variables that impact how likely you are to be in an accident. Some data points include:
- How long people drive in a single instance, how far they drive, and how fast — or slow — they drive
- The number of times drivers brake hard or engage anti-lock brakes, or when vehicles automatically trigger smart braking systems
- When airbags deploy or when vehicles register impacts that may not deploy airbags
- How long service lights remain on before drivers fix the problems
These data points all yield insights into driving habits. For example, if your telematics module registers lots of hard braking and abrupt stops, it may be a sign of inattentive driving. Likewise, traveling from one destination to another at a fast pace could suggest a tendency to speed.
All of this sounds like a way to penalize you, the driver — but, in fact, giving your insurance company this information is a good thing! For starters, if you’re already a good driver, it could result in lower monthly rates. Or, if you have bad habits, your insurance company can make you aware of them so you have the ability to lower your rates in the future.
Most insurers focus on the big picture: creating better policies. Combined with data from other drivers like you, telematics could be responsible for lower rates or fairer terms on future policies. Vehicle telematics create accountability for drivers and transparency for insurers.