Car insurance based on satellite technology has led to a 20% fall in crashes involving young drivers, according to one of the UK's biggest general insurers.
Telematics, or "black box" insurance, involves in-car tracking equipment to monitor driving behaviour such as braking and acceleration, cornering, speed and what time of day the car is driven. The data is then used to calculate insurance premiums: the better the driving, the lower the premium.
Co-operative Insurance has analysed the driving habits of 10,000 telematics insurance customers aged 17 to 25 across the UK, finding that they were 20% less likely to have a crash than those with standard insurance. Telematics customers have less serious accidents, with a typical claim 30% less than ordinary customers.
Young drivers have faced swingeing increases in insurance costs in the past two years. Premiums for men aged 40 to 49 have gone up by 6% since April 2010, but for those aged 17 to 22 they have increased by 40%, according to the AA. Those aged 23 to 29 have seen increases of 35%.
"It's predominantly because of the size of claims, as opposed to frequency," says Ian Crowder, AA spokesman. "Accidents involving younger drivers, particularly men, are more likely to result in death or serious injury."
Last year the AA incurred two claims in excess of £5m: both involved young male drivers aged 18. One rolled his car; his girlfriend, a passenger, will spend the rest of her life in a wheelchair. The other crashed head-on into another car while overtaking. The 18-year-old driver and two passengers in the back were injured. The front seat passenger and driver of the other car were killed.
The AA launched its own telematics insurance two months ago and says it is too soon to see any benefits. Crowder admits that those opting for such a scheme are likely to be safer drivers, but the AA hopes that other drivers will see the cost benefits.
Thomas Mason from Bromsgrove, Worcestershire, started driving his father's Peugeot 106 last year after his 17th birthday. The Co-op charged £2,100 for a policy including Thomas as a named driver. This included a £236 discount for telematics technology and was the cheapest policy they could find at the time. But Thomas (and his father) have driven so carefully in the past 12 months that the Co-op has cut the cost of renewing the policy to £847. Mason said: "You can't see the technology - it's installed under the dashboard, but you can check how you are doing by logging onto the website at home. You are given a score for your driving each day between 0 and 5, with 5 being the best. If you do things like driving fast round corners, or driving after 11pm and before 6am, your score drops."It does change the way you drive - it makes you more careful and aware of other drivers."
Telematics were introduced to 5,000 cars in the UK by Aviva in 2006 in a pilot scheme. The "pay as you drive" insurance was based on a mileage basis as well as the driver's performance, meaning that older drivers who tend do driver shorter distances, could also benefit from the scheme. But the technology was new and expensive. Customers paid £50 towards installation and some drivers were concernedthat technology which tracked their every movecould impinge on their civil liberties, and worse, reveal to their spouses where they had been. Take-up was low and the product was withdrawn after two years.
But telematics products now on the market offer the technology forfree, and a look at the online "dashboard" of the AA's Ian Crowder gives no indication at all of which roads he has taken. While it says he is good at anticipating traffic and the road ahead, reasonable at avoiding driving at night, and below average at keeping at reasonable speeds, there is no mention of where he has been. He gets an an overall score of 59 out of 100 – "not good enough to cut my premiums," he said mournfully.
Only Crowder and his insurer can access this information unless he gives his login details to others. The police can obtain data with a court order, but only if he is believed to have broken the law in some way or endangered the lives of others through his driving.
The AA believes that drivers are more ready to accept surveillance of their driving now than when Aviva first piloted the scheme. "The equipment is more sophisticated and cheaper now, and it is more socially acceptable to have gadgets in your car that monitor your every move," Crowder said. " "We're all used to CCTV, clocking in and out of work with pass cards, and the fact that we can be located by the pin pointing of our mobiles. All of these things work for our security, just as the telematics insurance does."
The technology has helped the police recover several stolen cars: one was tracked down within 20 minutes and the thief arrested. Drivers can also use the information gathered to prove that they are not at fault for accidents by speeding or jumping traffic lights. But insurers believe telematics will come into its own from December, when an EU directive will force them to stop using gender to determine risk. Until now, claims data has pointed to young men and older women being the most likely to claim on their policies, and insurers have hiked their premiums in line with the increased risk.
But as soon as sex becomes a forbidden subject for underwriters, insurers could find the prospect of gender neutral telematics much more attractive.
Crowder said: "This type of insurance accounts for less than 10% of the market right now. But I wouldn't mind betting that in 10 years time it will be closer to 50%."