23 April 2019
Black box insurance: what insurers aren't telling customers
Telematics – also known as black box – car insurance may soon be the norm in the UK. Many new cars are being built with black boxes installed from day one, and from a road safety perspective, there’s lots of strong arguments that support the wide roll out of the technology.
By keeping tabs on your driving, it encourages you to drive better, and can offer you savings on your insurance the better you are.
It can also keep you safe by sensing collisions and alerting insurers to a potential accident. It can help find your car if it gets stolen, and it can provide useful information if you need to make a claim after an accident.
But there are cons too – especially the ‘Big Brother’ aspect of telematics, the idea that someone somewhere is watching you. And they are. Your insurer or another company typically monitors any combination of your speed, braking, acceleration, location, mileage and what time of day you’re driving. Any or all of these factors may then be calculated to determine your driving score, and ultimately how much you pay.
Driving in the fast lane – who’s watching what?
Speeding in particular is a contentious aspect of data-monitoring in telematics. Many insurers monitor speeding as an element towards calculating a driving score. For example, one large black box insurer reviews an individual’s speeding score every 28 days, and if it falls below a certain threshold, they may cancel your policy with 7 days’ notice. This could be reasonable, as drivers who are consistently driving over the speed limit are riskier to insure, and if the insurers are sufficiently communicating with customers via notifications and warnings, as well as providing opportunities and enough time for drivers to improve their score, it could be fair with the proper safeguards in place.
But many insurers also have clauses in their policies about ‘excessive’ or ‘extreme’ speeding events. This means that if a driver goes over the speed limit by a certain amount, they will then have their policy cancelled outright with a minimum of seven days’ notice. One popular black box insurer has this speed limit set at 80mph, and states that as the policy is aimed at safe drivers, anyone driving over this limit is not suitable for telematics insurance. Another large black box insurer has this limit set depending on the zone – for example 45mph in a 30mph zone can result in immediate cancellation with just a week’s notice.
The issues with issuing cancellation notifications
These types of clauses are problematic for many reasons. A one-off extreme speeding event doesn’t necessarily mean a driver is bad, or in fact riskier than someone who is barely hovering above the insurer’s driving score threshold.
Another problem is that there is no standardisation across the industry as to what kinds of speeds should trigger an immediate cancellation. With some insurers it is closely aligned with legal speed limits, but with other insurers it can be based on their own internal algorithms. It puts a large burden of responsibility on the customer especially if they switch insurers regularly.
Disclosure is also an issue – where can a customer find the limits for their policy? In many cases it’s buried within pages of policy documents, or within a separate terms of business document. And that’s if the information is there to begin with. Many providers are vague as to what constitutes extreme or excessive speeding, and we’ve even been unable to obtain precise figures and terms from a handful of brands. This is unacceptable when it concerns the cancellation of insurance, something which can seriously impact a customer’s ability to get insured elsewhere. This potential consequence is also rarely well explained to customers, something which should be made clear.
So what are we doing about it?
With so many features and differences between insurers, shortcomings across the industry, and the increasing popularity of black box policies, we think the time is right for a telematics specific rating system, one that builds upon our existing car insurance redlines, but with extra criteria that relates to telematics.
Telematics should and can be a force for good. But as things stand, there’s little transparency and a danger that some customers are being hung out to dry for relatively minor transgressions. In the absence of any clear rules around how telematics data can be used, we’ll be launching new ratings which reward companies for clarity, transparency and fairness in the way they use customers’ driving data.
If you’d like to feed into our work on telematics, please get in touch. You can email us at firstname.lastname@example.org.