Many insurance companies are asking policyholders to install sensors in their automobiles in order to gauge their driving abilities. A device provided by car insurance carriers plugs into the auto’s data port, downloads onto a smartphone via a mobile app or can be utilized through onboard communications systems such as Onstar. The device collects information on mileage, braking, turns, acceleration, and what time of day the car is being used. The device, (called a “Telematic”) transmits the data to the company, which uses it to rate drivers. Traditionally, companies have gauged liability and risk based on parameters of socio-economic demographics, accident history, claims history, payment history and credit score. But Telematics supplies real data on the client, which can prove to be benefit to the policyholder’s insurance premium or reward customers with points that can be redeemed for gifts.

There are advantages and disadvantages to installing a “Telematic” in your automobile:

 1.    Parents who install a Telematic in their car, can receive a report from their insurance companies on the driving habits of anyone who utilizes their car. This is an excellent way to monitor your teenage driver’s abilities behind the wheel. 

2.    Policyholders who are tracked and deemed good, safe drivers can qualify for discounts and rewards. (Good drivers show less risk for filing a claim). Since premiums are often high for young drivers this gives them the ability to build trust with their insurance carrier and work towards lowering their rates.

3.    Insurance companies are looking to a time in the future where they can use drivers’ data to customize individual policies and gauge risk, instead of lying on outlying parameters such as credit score and driving history. 

4.    Over time, experts are predicting that the “Telematic” might function as a two-way device, informing customers of service stations with cheaper gas prices or assistance in case of emergency. Telematics can also be programmed to provide tips and feedback to customers on their driving to help improve their ability, receive additional discounts and advance driving safety.

5.    Skeptics of the program worry that their insurance rates will increase if their driving ability is poor. They feel that every little infraction can lead them to a higher premium.

6.    Customers also do not like the idea of “Big Brother” monitoring their every move. They feel the device will infringe on their right to privacy.  They, also fear their driving patterns and movements  will be tracked and can be used for nefarious purposes such as theft or home break-in.

7.    Clients also fear that the device can be “hacked” or controlled remotely and their personal information and data, stolen.

One thing that is true is that the interest in the program is growing, with Progressive Insurance reporting over 4 million customers signing up for their "Snapshot" Telematics Program, since they introduced it  to their policyholders. Interestingly, many of the drivers that are interested in signing up are under the age of 40. Growing up with so much computer technology present in their lives from GPS navigation tools to smartphones, they are accustomed to having their movements tracked and are consider it just an aspect of their everyday lives. And if they can save money on their auto insurance, they are all for proving that they are excellent drivers.