Telematics: Who, What and Why

how telematics affects car insurance ratesTelematics is the wireless communication between devices. But in terms of auto insurance, it can mean so much more. Drivers with telematic features might be eligible for big discounts on auto insurance, which is an exciting advancement considering the concept of telematics was born more than a decade ago.

What is telematics?

Converting driving information to a premium is easier than ever with today’s technology. Insurers gather data from a small in-car tracking device that records miles driven, acceleration, braking, turns, speed and time of day. Your premium depends on this data, which means if you’re a careful driver you can save big bucks.

Which companies use telematics?

Many companies have rolled out telematic-dependent insurance plans. Here are some of them.

  • Progressive: This company offers up to a 30 percent discount for safe driving. Progressive Snapshot focuses on braking, mileage and time of day. More than one-third of new customers are on board with this new plan.
  • Allstate: People who sign up for Allstate Drivewise are eligible for a 10 percent discount. Drivers with safe habits, which are based on speed, can receive up to a 30 percent discount on car insurance. Allstate recalculates discounts every six months.
  • Safeco: Enrollment is free Safeco’s RightTrack Program. After completing a 90 day drive analysis, you could save up to 30% percent on your current auto inusurance policy premium.
  • State Farm: Drivers can get up to 50 percent off car insurance with State Farm Drive Safe & Save. The caveat is that individuals must pay for a third-party vehicle tracking and communications package like On-Star.
  • National General: Do you use your vehicle infrequently? National General‘s Low Mileage Discount might be the right plan for you. It offers discounts of up to 54 percent for people who driver fewer than 15,000 miles per year.
  • Travelers: Drivers can receive a 10 percent discount for signing up for Travelers Intellidrive, which calculates only the average weekly mileage. Once an individual registers for this plan, he or she can get additional discounts of up to 30 percent off the premium.
  • Metromile: On average, low-mileage drivers save $500 a year with pay-per-mile insurance. The Metromile Pulse easily plugs into your car to accurately measure mileage and does not take driving behavior into account.

Pros and cons of telematics

Like any insurance plan, the aforementioned telematics-based plans have pros and cons. For the most part, drivers are happy to adopt safer driving habits in exchange for a discount. The system is a useful tool to teach teens to drive safely and it provides feedback in real time when the driver brakes too hard. Additionally, these tracking devices make it easier to locate a stolen vehicle.

That being said, some drivers worry about skyrocketing premiums if they drive recklessly. The system might also impose unavoidable costs based on a person’s schedule. For example, someone who has to drive to work at night is more likely to come across fog, which is listed as one of several hazardous conditions that may increase the premium.

Others worry that the device may malfunction, causing drivers to pay out of pocket for any technical errors. Aside from finances, people consider data privacy to be a big con, as a survey showed many older and female drivers are resistant to monitoring.

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