Can Technology be the Answer to Rising Insurance Costs

August 7, 2012 | By | In News

It seems that every aspect of motoring is getting more and more expensive at the moment. With rising fuel prices putting a huge burden on business and family budgets, rises in the price of steel putting up the cost of new cars and VAT, it’s no surprise that drivers feel like they’ve got a hole in their pocket. But there is one area of driving that has seen considerable increases in recent years – insurance.

The cost of insurance has increased dramatically in recent years, with figures from the AA revealing that the average cheapest premium for comprehensive cover sold directly jumped by 8.5pc year-on-year to £1,034. If you’re a young driver, the cost is even more eye-watering. Average premiums for men aged between 17 and 22 now stand at a staggering £2,792 a year.

The reasons for these increases can vary depending on who you’re prepared to listen to but the usual factors will generally crop up each time. The increase in personal injury claims, many years of aggressive pricing prior to the recession, fraudulent claims and the collapse of the financial markets have all contributed to increase in premiums today. Wary of the implications of increasing premiums, particularly with many young drivers feeling ‘priced out’ of driving, many insurers are turning to more high-tech and unorthodox methods to try and bring premiums down.

Many insurance companies are now looking at how GPS tracking can help them to mitigate their risk and therefore offer reduced premiums. One such example comes from Co-operative Insurance, which offers a ‘Smartbox’ policy. The Smartbox is effectively a black box, recoding data about where and how the car is driven. Every three months, the box sends data back to the insurer. If the insurer decides that the car is being driven safely, then it can offer discounts to the driver. If however, the car is not being driven safely (such as speeding in built-up areas, regularly braking heavily etc), the insurer can actually increase the premium.

The added bonus for the insurer (and for the driver) is that if the car is stolen, the Smartbox also acts as a Tracker. A similar scheme is run by Coverbox although, rather than charging you a full premium and then monitoring your driving, this system works on a pay-as-you-drive basis. You simply pay a flat premium (based on usual factors such as the type of car and where you live) and then pay a per-mile price, varying depending on the time of night you drive and the way in which you drive. More and more insurers seem to be moving towards these technical solutions to bring down costs for drivers and to minimise their own risks.

By knowing where a car is at any given time any by knowing how it’s being driven, insurers can base their premiums much more on individual circumstances, which should reward those of us who do drive responsibly.

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