What Is Black Box Car Insurance?
Black box car insurance, also known as telematics insurance, is a type of auto insurance that uses technology to track and record a policyholder's driving behavior. The goal is to base the driver's insurance premiums on how much they drive and how safe (or risky) they are behind the wheel.
Key Takeaways
- Black box car insurance uses technology to track and record a policyholder's driving behavior.
- The insurance company can then tailor premiums based on how much and how safely the policyholder drives.
- Safe drivers may see a reduction in their auto insurance premiums, but others may end up paying more than they would with a conventional policy.
How Black Box Technology Works
Telematics relies on a combination of telecommunications technology, including wireless devices such as cellphones and GPS.
A "black box" is either physically installed in the car or downloaded as a smartphone app. It links to a GPS device that measures and records vehicle speed, location, distance traveled, driving frequency, and time of day the car is in motion. Other driving performance factors that can be measured include how hard the driver applies the brakes, how rapidly the car accelerates, and how sharply the driver may take a corner.
All that data is converted into a score, which the insurance company can use to set a personalized premium rate for the driver. The better the score, the lower the premium should be.
How Insurers Use Black Box Technology
Auto insurers use black box technology for a number of purposes.
For example, some insurers offer pay-as-you-drive(PAYD) or usage-based insurance(UBI) policies. With a conventional auto insurance policy, drivers typically pay a fixed premium determined in part by the number of miles they expect to drive during a certain period, such as six months. By contrast, with a PAYD policy, the driver only pays for the miles they actually drive. The black box device or app is how the insurer keeps track of this.
Other insurers use the technology primarily to assess how much risk a particular driver poses. They may offer refunds to safe drivers, provide a bonus mileage allowance for them, or renew the policyholder’s policy at a lower rate.
Those incentives appear to be leading to a growing acceptance of black box technology on the part of drivers. A 2021 J.D. Power survey found that only 16% of U.S. car insurance customers have signed up for telematics, and 34% are willing to try one, particularly since some of the insurers offer 30% to 40% discounts for customers that do.
Similarly, in 2020, a survey by Arity, a telematics company, found that "about 50% of drivers were comfortable with having their insurance priced based on the number of miles they drive, where they drive, and what time of day they drive, as well as distracted driving and speeding." That figure was up more than 12 percentage points from a similar survey in 2019.
But though the technology can mean lower rates for some policyholders, a driver who has a long commute, works late-night shifts, or consistently goes over the speed limit may end up paying higher premiums with a black box policy than with a traditional policy.
Another cause for concern is data privacy—in particular that insurers will share personally identifiable information gathered from black box devices with third parties such as banks or law enforcement agencies. In the Nationwide survey, 62% of drivers said they had privacy concerns.
FAQs
Black box car insurance, also known as telematics insurance, is a type of auto insurance that uses technology to track and record a policyholder's driving behavior. The goal is to base the driver's insurance premiums on how much they drive and how safe (or risky) they are behind the wheel.
How does the insurance black box work? ›
Black box insurance, also known as telematics insurance, uses a device installed in your car to track your driving habits. This device monitors factors like speed, braking, acceleration, cornering, and mileage. You are scored based on those driving habits.
What are the disadvantages of having a black box? ›
Bad drivers will pay higher premiums
If you've got some bad driving habits (and you don't reform), you could actually end up paying more with a black box policy. Regularly driving over the speed limit, hard braking or rapid acceleration, poor cornering or road positioning are likely to lead to higher premiums.
What are the rules for a black box? ›
The 7 most important black box rules
- Stick to the speed limit. ...
- Brake in plenty of time. ...
- Avoid driving your car late at night. ...
- Don't tamper with the box. ...
- Keep an eye on your mileage. ...
- Don't let any uninsured drivers behind the wheel. ...
- Don't put your foot down.
And if you do have a crash with a black box fitted, the data can help determine whose fault it is. It can attest where you were and how fast you were driving at the time of the crash, which can help to prove you weren't at fault – if that's the case.
How long does a black box stay on your car? ›
Most car insurance policies cover you for twelve months, so that's how long you'll be required to keep the black box fitted for. If you decide to renew, it will stay put. If you choose to leave the policy, you simply remove the black box (or get a professional to do it) and then return it to the insurer.
How much does a black box cost? ›
Your insurer will arrange the installation of a new box in your new car and the old box will be deactivated. Some insurance providers may fit a new black box for free, while others may charge up to £150 for the service.
Is it a good idea to have a black box? ›
Most black boxes are, effectively, a tracker, so will easily be able to locate your car in the event it gets stolen. This is particularly important if you're a motorhead and wanted to treat yourself to a nice car. Some black boxes aren't immediately visible to passersby.
What is the risk of black box? ›
A black box model is not inherently risky, but it does raise some governance and ethical questions. Investment advisors who use black box methods can conceal the true risk of the assets they recommend under the guise of protecting proprietary technology.
How much will a black box save me? ›
The average costs of a telematics car insurance policy for 17-24-year-olds was £1,483, the analysis suggested. The average savings with a 'black box' policy for 17-20 year olds was £1,078. A total of 19% of all car insurance sales to under 25s via the site were telematics policies, the report said.
There are some occasions where you can, although this is quite rare. If you can you will need to be over 25 and it will need to say that you can on your statement of insurance.
Is black box free to use? ›
BlackBox Membership is free and there are no subscription fees of any kind.
Who needs a black box? ›
Young drivers are often charged more for insurance as they're viewed as a higher risk, but a black box gives you the chance to show you're a good driver. The telematics technology monitors how and when you drive along with lots of other risk factors to help calculate your driving score.
Does a black box increase insurance? ›
However, it's important to note that the use of black boxes is not always guaranteed to result in lower premiums, and in some cases, premiums may actually increase if the data collected indicates that the driver is engaging in risky driving behaviour.
Does a black box know the speed limit? ›
Roads driven – The black box will be able to tell what type of road you are driving on, and will therefore be able to determine what the speed limit is on that road. Driving Speed – One of the things you will be judged on will be the speed at which you are travelling.
Does a black box track your car? ›
It works by accessing data using the black box's GPS (Global Positioning System) to determine its exact location – here's how: Monitoring: The black box continuously collects and transmits data about the vehicle's status, including its location. Some insurance companies use this to track the vehicle's location.
How does a black box know the speed limit? ›
How does the wireless tab (known as black box) know the speed limit? The wireless tab monitors your driving speed using GPS and can also detect the type of road you're driving on. In this way, they can determine whether you are within the speed limit. For example, you could be on a single-carriageway or motorway.
Do you get no claims with a black box? ›
Can I earn no claims discount with black box car insurance? Yes. As with other car insurance, you can earn a year's no claims discount (NCD) by completing the full 12 months of insurance without making a claim.
What happens if I go over my miles on black box? ›
Exceeding your mileage with a black box insurance policy doesn't mean you'll be prohibited from driving or fined. Instead, you may simply have to pay more.
Do car black boxes track location? ›
Some models may also track GPS location and capture video or audio from inside the vehicle, though the recording capability may be limited to around 20 seconds before an accident.
