Telematics Car InsuranceCredit: Dave DugdaleCredit: Dave Dugdale

How a little black box can drastically reduce insurance costs..

It seems that young drivers and their parents have forever been tearing their hair out over the ever increasing price of car insurance. Whilst statistics show that younger drivers are more likely to make insurance claims, this is unfair on teenagers who drive sensibly and with due care and attention. When household budgets are squeezed it doesn't help matters when insurers are charging the earth for youngsters to get on the road. This could all be changing however, as a new technology is emerging which could change the face of insurance pricing for teenagers.

With the use of GPS satellite technology and the installation of a small black box inside a vehicle, driving behaviour can now be tracked and reported on electronically. This means that both good and bad driving can be effectively monitored with the aim of allowing insurers to decrease the price of insurance premiums for drivers whose recorded actions meet certain criteria. Such criteria will be based upon speed, use of breaking and general driving awareness.

This technology is called telematics car insurance and its use could mean that competitive pricing by insurers for young drivers will finally be possible. It's been dubbed the 'fair pay' or 'pay-as-you-drive' insurance model as it allows an individual to be rewarded for their own driving performance rather than bearing the brunt of an inflated premium which has simply been based on averages of young driver behaviour. This will be welcomed in a market place which has been viewed as lacking in transparency to date.

Of course, reckless drivers will experience a different side to telematics car insurance in that they would see a rise in the cost of their premiums in accordance with their more erratic and unsafe driving behaviours. Driving recklessly, braking and cornering quickly are all actions which the technology will track and feed back to the insurers to drive their ongoing policy pricing.

Car insurers will provide routine reporting and analysis on the driving of the policy holder throughout the year with decreased or increased payments to occur in line with the recorded motoring performance. Whichever way you look at it, telematics insurance can only be a good thing for the insurance market as it provides the possibility of a true 'pay-as-you-drive' scenario. This fairer and more consistent approach to insuring will no doubt be well received by teenagers and parents the world over.