What is a Telematics-based car insurance plan and how does it work?

You might have read about it in the news recently; a relatively new form of motoring technology can make your car insurance plan premiums cheaper. Telematics driving insurance plans have been in Singapore for a few years and has offered up to 35% discounts on insurance costs as a way of rewarding good behaviour. How does it work and can you benefit from it? In this article, Kwiksure Singapore takes a closer look.

What is Telematics and User-Based Insurance (UBI)?

Traditionally, the cost of your car insurance is calculated on things like your age, vehicle, and what you use your vehicle for. If you’re a busy executive driving an expensive sports car in a crowded, traffic-ridden city centre, you might find yourself paying more for vehicle coverage than a retiree that has a simple run-around car that they use to pick up groceries twice a week.

Where UBI and Telematics comes in is your behaviour as a driver becomes the focus for insurance calculation. Using equipment that can be installed into a car, software monitors the vehicle for things like excessive acceleration, sudden braking, abnormal driver control, and collisions. Then, it provides a “score” of sorts that rates the behavior of the driver.

How can this influence your car insurance? First, the personal driving data can be used to determine whether you’re a low or high risk driver. As insurance costs are based on risk, being a “good” driver means you exhibit behaviours that are less likely to see you involved in an accident. Poor driving behaviour means you’re more risky, and therefore more likely to make a claim when you have an accident.

The bigger picture, however, is that this avenue for driving behaviour data means insurers will have a wealth of information available to actuaries to be able to better predict, assess, and price a car insurance plan for risk. While one driver’s behaviour tells a story of that individual person, data on the driving behaviour of certain users can help make the pricing of plans more accurate overall.

What sort of information can Telematics tell us currently?

One commonly held belief in both the driving and insurance communities has been that younger drivers are more inexperienced and, therefore, more likely to be involved in an accident. Even now, drivers under the age of 25 are generally charged more for car insurance than others. What Telematics has found, with analysis of the user data, is that about 40% of drivers in the younger category are actually safer than people over 35 years of age with 10 years’ driving experience.

The introduction of Telematics has also shown that this incentive-based approach to monitoring drivers also has positive effects on changing driver behavior. According to an Insurance Research Council survey a few years ago, more than half of drivers reported making changes to the way they drove after having Telematics installed. Over 35% of drivers made small changes after viewing their driving reports, while 20% said they made significant changes.

More than 80% of people who had Telematics installed reported viewing their driver behavior information, and nearly 90% of those people said they found the reports useful. The data further showed that there was a strong connection between safer and improved driving habits after having the technology installed.

How will Telematics affect the costs of my car insurance plan?

What initially started as an offering through NTUC Income has become wider spread throughout the car insurance community in Singapore. At the moment, there are two types of UBI; pay-as-you-drive (PAYD) and pay-how-you-drive (PHYD). PAYD calculates your insurance premium based on mileage, using an odometer monitor and GPS data as their main form of Telematic measurement.

PHYD systems are based on the aforementioned Telematics measures that use equipment to measure personal driving behavior (braking, turning, accelerating etc). Some companies may have a smartphone app that can be used to help record and report on your driving behavior as part of a PHYD setup.

When it comes to influencing the costs of insurance, no insurer currently seeks to punish “poorly” behaving drivers as determined by Telematics data. They will, however, offer discounts beyond your No Claims Discount – as high as a 35% reduction on a policy renewal with one provider, and up to a 100% waiver of standard excess charges for another.

Who should I talk to about a Telematics car insurance plan?

A quick internet search will tell you which car insurers in Singapore are using Telematic motoring technology to offer cheaper vehicle coverage. A faster way to get the sort of coverage you need is to engage the services of an expert broker. Kwiksure Singapore is an experienced motor insurance intermediary that has close relationships with all of the major insurance providers in the country.

For a free quote or some friendly advice, contact the team at Kwiksure Singapore today.