A telematics device measures how you drive. The advertisements tell us drivers that drive fewer miles, don’t brake hard and drive safely, save money. Is that true? If you have one of these devices, it’s easy to find out. We show you how to find out if a telematics device is delivering the discounts you deserve.
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Do telematics devices really save money?
There’s no way to really know whether telematics devices save money without measuring. Uniquely, the pandemic gives every driver with a telematics device the opportunity to make those measurements. Here’s how to find out.
Look at your insurance bill from February. Now look at the same bill from April. If telematics devices are adjusting cost based on the factors cited, most drivers should see approximately a 30% discount.
If you don’t receive monthly bills, check a six month bill that ending before March, 2020. Next, check another six-month bill, ending exactly six months later. Below are a couple scenarios that may apply:
- Driving down 80% for the entire six months. Look for a decrease of ~30%
- Decreased driving by 80% for only three of the six months and normal for the other three months, look for a six-month decrease of ~15%.
Why telematics devices are becoming so popular?
There’s a major incentive for insurance companies to embrace telematics devices. The incentive is that you don’t save money, until proving you’re a safe driver.
The system used to be different. It used to be that insurance companies would ask drivers how many miles per year they drove. Some drivers would report they drove less miles per year than they really drove. That way the formulas for estimating risk, and price, were more favorable to the customer. However, that system didn’t work for insurance companies, or other customers. It resulted in higher loss costs for drivers that lied. This was unfair to everyone. The driver that lied got too low a price. The driver that told the truth consequently was punished with too high a price. Hence, telematics devices started to grow in popularity.
Would I save money?
It’s hard to know if specific drivers would save money with these devices. Call us skeptics, but we don’t think companies would broadly endorse devices that cost them money to install and cause them to lose revenue by proving the drivers are safe drivers. Yes, we suspect that there is some number of drivers that end up paying more.
That said, the concept of simple slogans like “Safe Drivers Save 40%” are powerful. We’re not picking on any specific company. However, that particular slogan succinctly summarizes the advertising opportunity for carriers.
If in fact advertising campaigns like this help draw safer drivers, insurance companies stand to benefit, significantly. Safe drivers cost insurance companies less money because they have fewer accidents.
Should I install a telematics device?
At ValChoice, we don’t believe there is a connection between the quality of insurance a company provides and the availability of a telematics device from that company. Instead, consumers should focus on buying protection from companies they know will stand behind them when they need the protection. These companies can be found on our list of the 5 best insurance companies in each state. Just click the button below.