23 March 2012
7 Mins read

Are black boxes the way to drive down insurance costs?

With insurance premiums on the up it is no surprise that British motorists are doing all they can to cut costs.

In January this year, figures from the AA revealed that car insurance costs had increased by 15 per cent on the previous quarter, bringing the average to an eye-watering £971.40.

At the moment it is young male drivers bearing the brunt, with their premiums averaging around £3,000. But when new EU discrimination rules come into force later this year, costs for women will rise in line with this.

Simon Douglas, AA Insurance director, said that cheap deals are fading out and some insurers are now even refusing to cover young adults aged under 21.

"Young women will be see the biggest premium increases," Mr Douglas said.

"It is unknown territory for insurers who will be careful to avoid significant losses they can ill afford."

He suggested that one way around soaring premiums is more widespread use of telematic or 'black box' insurance, which offers costs based on the driver's performance.

The black box is a monitoring device around the size of a mobile phone that records time of travel, distance, types of roads used, speed, as well as levels of acceleration and braking.

Information recorded can be used following an accident, as well as to determine whether a motorist is generally cautious or reckless.

However, drivers can also view the data collected from the black box to see what they can change to improve their insurance premiums.

"It puts ownership of responsible and safe driving firmly in the hands of the driver, regardless of their sex. It is genuinely a gender-neutral product," he explained.

And it seems consumers agree. A poll by GoCompare revealed that 57 per cent of drivers expect they will switch to black box insurance in the next five years.

Indeed, 19 per cent said they would be happy to do so at their next renewal.

Over nine out of ten of those polled believed that car insurance premiums should already be based largely on the way they drive, with 97 per cent thinking that black box technology would reward careful drivers with lower costs.

However only 60 per cent felt that where they went and at what time of day should have any impact, while 49 per cent think that the current method of assessing premiums on age and gender is largely fair.

"Given the rising costs of motoring, we think that the new generation of telematics car insurance policies will play a greater role in the car insurance market in the coming months. And, as our survey shows, many drivers, across all age groups, would happily embrace the new in-car technology in a bid to keep their premiums down," said Scott Kelly, head of car insurance at Gocompare.com.

Satnav firm TomTom has already teamed up with insurance broke Motaquote to provide consumers with Fair Play Insurance, which bases premiums on driving behaviour.

"If you think of your insurance as your car's MPG – the better you drive, the longer your fuel will last. It's the same with Fair Pay Insurance, good drivers get more for their money and in that sense they will pay ultimately less." Said Nigel Lombard, managing director of Fair Pay Insurance.

However, while installing a black box will, no doubt, cut some people's insurance premiums, there are those who could see an increase.

It is natural for people to be confident in their skills, but with the majority of drivers convinced that their abilities are above average, some will be in for a nasty surprise.

The GoCompare poll seemed to suggest this, with 75 per cent of people expecting to see a fall in premiums with a black box, but only 29 per cent open to personalised advice on how to improve their driving.