Young drivers are slugged the most with high car insurance premiums but this could be changing, says a leading insurance comparison expert. With the release of new in-car “black box” devices that monitor driving behaviour and usage, new drivers may be able to make savings on their premiums.
The in-car devices, officially known as ‘telematics’, are now being fitted to cars by some Australian insurers to more accurately determine a driver’s policy premium, based on their driving behaviour. Telematics policies were introduced in Australia in October 2013. AI Insurance, which launched the policy on leading comparison website comparethemarket.com.auon 6 March, is only the second insurer to offer it.
Grant Waldeck, spokesperson at comparethemarket.com.au, says telematics may provide new drivers, who display safe driving techniques, (generally penalised with high premiums for their lack of experience) with lower insurance premiums. As a consequence, Grant is tipping the latest development in car insurance software to be one of the fastest-growing Australian trends in insurance for younger drivers.
“Switching to a telematics policy also allows the underwriter insight into your driving habits which they base your renewal premium on,” he says. “With other policies, driver’s premiums are based on a pool of risk data. Therefore experience is no longer a key criterion for renewing premiums for younger drivers.”
Telematics policies are already enjoying strong consumer demand in the UK. With the British Insurance Brokers’ Association recording a 60 per cent increase in the number of UK drivers taking up live telematics insurance policies in the UK between 2012 and 2013, Grant is confident that this upward trend is likely to continue in Australia.
AI Insurance is the first insurance provider to offer a live telematics policy on comparethemarket.com.au, with the policy costs including device installation and lease. AI Insurance CEO Roland Lange says, “Across the industry, safe drivers may be rewarded with lower annual premium rates based on their car usage and how they adhere to safety.
“While more accurate pricing is exactly what this product will deliver, drivers should also consider additional benefits such as the ability to lower incident risk. Additionally, as our telematics system provides an accurate recording of speed, driving technique and the impact of the vehicle, if an accident takes place, the evidence we gather could streamline the claims process for the driver.”
In-car telematics also increase the ability to recover stolen vehicles and send an auto alarm to the insurer in the event of an incident. Users of the system also have the ability to view their driving habits online.
In addition to in-car live telematics policies, Grant Waldeck provides his top five tips to help young, new drivers keep policy costs low.
- Avoid high performance cars and unnecessary modifications. High performance cars are a red flag to insurers. Grant says, “High performance cars come with an increased risk of an accident occurring when combined with the fact that you’re a new driver and will increase the cost of your premium. Before purchasing your vehicle, compare insurance prices online for that particular model. This will provide you with an opportunity to seek another option if the premiums are too expensive. In addition, modifications, however small, can increase your premium significantly.”
- Only pay for the kilometres you drive. “If you only use your vehicle to drive to university or work then consider an insurer that provides cover based on the kilometres you do. If you choose to do so, minimising your car usage midweek or at peak hours by taking public transport or car sharing with a friend can decrease your policy too,” says Grant.
- Garage your car if possible. Factors such as whether or not your car is garaged will affect your premium. “As a driver, you might not have access to a garage or driveway. Consider swapping the garage space with your parents, who are likely on a more affordable policy. Crunch the numbers with them and find out if the impact of no garage space on their premium will have less of an impact than on your premium,” says Grant.
- Maintain your No Claim Bonus. The more you claim, the higher your premium. “A 24-year-old driver with a history of claims will most certainly pay a higher premium than a 24-year-old who has never claimed. If you have a Rating 1 it may be worthwhile paying the additional fee offered by the insurer to protect your No Claim Bonus,” says Grant.
- Compare and buy online. “By searching online and using services such as comparethemarket.com.au, you’re able to compare a variety of policies at the same time whilst only entering your details once. It’s important to remember that the cheapest policy may not always be the best policy for you. Compare all the variables including excess costs and ask a second opinion from an experienced driver before securing your purchase,” says Grant.