Can telematics insurance really lower car cover costs for young drivers?

What is telematics insurance?

Telematics insurance policies use personalised data to assess the way you drive in order to work out insurance costs.

This is different to regular (non-telematics) policies where insurers use industry statistics to calculate premiums. However, while that data can give insurers some idea of risk, it’s a very generalised approach and not a reflection on the way you personally drive.

How does telematics insurance work?

If you choose a telematics policy (also known as black box insurance), a small telematics device will be fitted to your car. Alternatively, a handful of insurers use an app you can download onto your smartphone instead of fitting a physical device.

The device will then monitor the way you drive and specifically look at speed, acceleration, braking and cornering. It will also record the number of miles you cover, the time of day and the type of roads you drive on. All this data will be combined to give you an overall score. The information is sent to your insurer who will use it to make decisions about your premium.

Some insurers will use this data to tweak your premium on a monthly basis (particularly for pay-by-mile type policies). Others will review what you pay every three months, but most will assess premiums at renewal.

Can telematics insurance save me money?

The short answer is yes. Our most recent research shows that telematics insurance can save you money on your premium.

We analysed 53 insurance quotes for a driver aged 25 with a clean driving licence and six years of experience behind the wheel. Quotes were based on driving a Ford Fiesta and covering a fairly average 7,000 miles annually.

Of all the quotes we gathered, four out of the five cheapest policies were in fact, telematics policies.

How much cheaper is telematics insurance?

The cheapest policy we found was a telematics policy priced at £588. This was 13% less than the cheapest regular policy (costing £678).

To get a better idea of telematics overall, we then compared the five cheapest telematics policies and the five cheapest regular policies. The results were the same with telematics insurance costing 13% less on average (a saving of just over £100).

Is telematics insurance good value for money?

While telematics insurance can save you money on your premium, there are other costs to consider too.

Your excess

Although the excess tends to be lower for telematics insurance compared to regular policies, it’s not quite as clear-cut as it first seems.

When we reviewed the excess amount on our quotes, the average excess for telematics insurance was £459. For regular policies, the average excess was £600 but this figure was heavily skewed by one unusually high excess. If we stripped this particular excess out, regular policies would have a lower excess compared to telematics insurance.

Don’t forget that there are two types of excess. Compulsory, which is set by your insurer and voluntary—agreed between you and your insurer. With this in mind, the overall excess you pay can vary depending on what you agree.

Cancellation fees

Typically, cancellation fees for telematics insurance is higher compared to regular policies.

Our research revealed that the average cost to cancel a telematics policy ranged from £155 to £247 depending on when the policy was cancelled. In some cases, this was up to four times higher than the cost to cancel a standard non-telematics policy.

This difference mainly comes down to the resources involved. For example, as well as the cost of the actual telematics device, some insurers will send someone to fit it to your car. If you cancel the policy, it will also need to be removed professionally.

Does telematics insurance have a curfew?

There’s a common belief that telematics insurance comes with a curfew but this is rarely the case. There might have been an element of truth in this when telematics was first launched but it’s hard to find a policy today with this sort of limitation.

However, telematics policies do record the times at which you drive. If you tend to drive more at night, this can have a negative impact on your driving score which can then influence your premium.

What are the pros and cons of telematics insurance?

There’s a lot of information about telematics insurance out there which can make it a tricky topic to navigate. So while there are some clear benefits—such as a lower premium, there are other elements that need considering too.

To help you make your mind up, here’s a quick summary of the pros and cons:

Is telematics insurance right for me?

The right insurance policy for you comes down to cost, need and convenience. If you’re a young driver, a telematics policy can mean cheaper car insurance but you’ll need to consider cancellation and excess fees to get a better idea of overall cost.

Also remember that while curfews generally don’t exist anymore, a number of policies will penalise you for frequently driving at night. If you have an evening job, this could put you at an unfair disadvantage.

Ultimately, the best way to work out what’s right for you, is to compare a range of telematics and regular policies and see what each one offers. There are also other ways to lower car insurance premiums which are worth considering too—for example, adding a named driver.

To start comparing telematics car insurance quotes, simply answer a few questions about you and your car and let our car insurance partner Quotezone take care of the rest: