Creating A Stronger Car

4 Steps to How Insurance Telematics Work

If you want to reduce your insurance premium, you may want to talk to your auto insurance agency about telematics. Many auto insurance agencies are adopting the use of telematics to get more accurate information about a driver's skill level, and using that information to make adjustments to your premium.

How Data Is Generated

The key to insurance telematics is the gathering of data. This data is gathered directly from your vehicle itself. Sensors are installed on your vehicle. These sensors are attached to the on-board diagnostic slot on your vehicle; this is generally the slot that auto mechanics use to read the codes on your vehicle; however, it can be used for telematics purpose as well. The sensor could also be activated through your smart phone as well.

How the Data Is Collected

These devices record and collect information about your driving automatically in real time. This information is wirelessly transmitted to the company behind the device. This may be your insurance company or a third-party that is in charge of the telematics software. Many third-parties operate the actual telematics software and then provide this information to participating insurance companies and service bureaus.

How the Data Is Analyzed

The data that your vehicle generates is then analyzed by your insurance provider. The data that your vehicle generates is compared against aggregated data from other drivers as well. Your data is compared against the way that others drive and against your own past driving history.

The way that you drive, how many miles that you drive, and when you drive are all factors that are taken into consideration in order to customize your insurance premium so that your premium is based on your driving behavior and is not all about your credit score, driving history, age and other factors that insurance companies currently use to determine your premium amount.

How the Data Is Shared with You

Finally, the data that the insurance companies generate is shared with you, generally online. You are then given the opportunity to make changes to your driving behavior. Any positive changes you make to your driving behavior will further reduce your premium.

Insurance telematics are all about basing your insurance premium on your actual driving behavior and time on the road instead of the current factors that insurance companies use to determine your premium. This can be beneficial if you are a good and safe driver.