Do Telematics Devices Really Save You Money?

by Jamie Simmerman · 6 comments

Telematics devices are all the rage with car insurance companies. They promise that if you install a little gadget in your car, you’ll get discounts galore on your monthly premiums. But do these gadgets really save you money? Perhaps not.

In a recent Forbes article, Adam Tanner revealed that many insurance companies will use the data gathered by telematics devices to adjust insurance rates — both for discounts and increases.

How Telematics Devices Work

Wired into the dashboard of your vehicle, these little devices collect real-time information when your vehicle is in use. Data collected could include speed, distance travelled, direction the vehicle is heading, the presence of objects in close proximity to the vehicle, and whether the vehicle makes sudden stops, starts, or direction changes. (That means doing donuts in that empty parking lot isn’t such a good idea once the telematics device is installed, even if no one is around.)

Your insurance company uses the data to help determine your driving patterns and can set your insurance premiums based on THEIR analysis of that data. That’s right, how they interpret the data is entirely up to them. You don’t even have to be made aware of the parameters used to determine your status.

The Drawbacks of Telematics Devices

Even if you’re generally a good, safe driver, your telematics device will serve as a tattle tale for that one race to beat a yellow light, or that one time you sped all the way to a meeting you were late for. If you’re not careful, even one poor decision can lead to insurance hikes.

And what happens when your teenager asks to borrow the family car? Does the device know the difference between drivers? Can you imagine the fall out if several of your teenage son’s friends took your car for a joyride one night? There’s no way to shut off when a telematics device collects information — and no way to indicate the presence of a new driver. That’s because your insurance covers the vehicle and the driver.

If someone borrows your car and is involved in an accident, the insurance company covering the car AND the insurance company covering the driver may both be liable for damages. Be careful whom you lend your car to, or your insurance premiums could skyrocket.

Furthermore, if your accident goes to court, the information on the device could be subpoenaed and used against you. Additional data on the device could also be used to establish a pattern of bad driving habits that could sway the case if evidence is inconclusive.

What do you think? Are you confident enough in your driving habits to install a telematics device for discounted monthly premiums? If you’ve had a device installed already, how has your experience been?

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{ 6 comments… read them below or add one }

David August 29, 2013 at 5:54 am

I had the Progressive device for little less than a week. Living in a large city, its hard to not be in a position of having to hard brake, one of the things they measure. The device was very sensitive as I would barely tap on the brakes and it would start beeping to let me know I had hard braked. After only 7 days I gave up and sent it back. What they are looking for is perfect drivers. Hardly possible in a big city like I live in. Hard brakes are all but unavoidable.

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Paul August 29, 2013 at 8:59 am

What if you are a perfect driver but someone cuts you off and forces you to brake hard? I don’t see how this device could be good unless your car is almost always parked and rarely used.

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Susan Dee August 29, 2013 at 1:14 pm

Telematics and usage based car insurance in general is still not widely understood and there are also different types of system in use.
Regardless, privacy concerns are ever present; what data is being collected and for what purpose etc. Insurance companies have a big challenge there.

Do Telematics Save You Money? If you insist on remaining with a carrier that has a telematics scheme – then potentially yes, versus their non-participating premium to you. However, even after such a telematics ‘discount’ you could still be paying $750 more than the next carrier without telematics (and hassle of). In the bigger 2013 picture the answer is no. There are dozens of carriers in each state and conventional base rates (the foundation of quotes) vary substantially. All those good saving intentions through telematics are eclipsed by a better choice of insurer. Better means an insurer that has a lower-cost regulated base rate set for a driver of your risk-profile and location.

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KM August 31, 2013 at 8:19 am

We had those devices from Progressive and actually just finished our measurement period and mailed them back. I got an 8% discount and my husband got 2%. But what I really thought was stupid is that they measure hard brakes (deceleration of more than 7MPH/second), so it beeped at us every time we braked for a yellow light. I called them up and asked them how they thought it was safer for us to run yellow lights instead of stopping at them and they gave me some BS excuse about how it compares our data to the other people living in the same zip code (so, if we brake more than the average, we don’t get a discount). It’s an entirely stupid system, but thankfully those things are out of our cars now and we don’t have to listen to them beep at us every time we do the right thing and not try to run a yellow/red light. They also apparently reduce your discount if you drive a lot, so taking my husband’s car for day trips to the mountains (~200 miles in one day) didn’t help his discount.

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Property Marbella September 1, 2013 at 4:14 am

Insurance companies may use telematics devices against you if an accident occurs.

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James Booker September 6, 2013 at 7:20 am

I think that they will probably look at your driving history (if you have the device fitted for a while), if you hardbrake often then you are probably doing it on purpose and your policy will increase.

I think doing it once or twice would just be considered to be incidental at best.

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