The AA is to launch an insurance policy which uses black box technology to track driver performance – potentially lowering premiums for hundreds of thousands of young and inexperienced drivers.
The AA Drivesafe policy will require the installation of a black box in the driver’s car which will use satellite technology to monitor behaviour such as braking and acceleration, cornering, speed, and at what time of day the car is driven. The data will be used to calculate premiums; the better the car is driven, the lower the premium, and vice-versa.
Drivers will be quoted an average cost for their annual premium at the start of the policy, which includes the cost of installing the box. But they can reduce the premium in as little as 60 days, provided they drive well. Payments are made by direct debit, so adjustments can take place throughout the year.
Simon Douglas, director of AA Insurance, said: “It is likely to appeal to inexperienced drivers as well as parents whose youngsters have their first car. Parents know driving behaviour is being tracked by a system that also provides crash, breakdown and theft alerts.”
According to the AA’s British Insurance Premium Index, premiums for those aged 17-22 have increased by an average of 39% since April 2010, putting the average standard premium for a male aged 17-22 at £3,163, or £1,799 for a female of the same age. But Douglas said the black box product could lead to savings of up to £850 a year.
A ruling by the European Court of Justice (ECJ) that will outlaw use of gender to calculate insurance premiums is due to be introduced on 20th December 2012. “At present, young women can expect to pay up to 40% less than their male peers for car insurance,” Douglas added.
“Although young men are statistically more likely to have a serious crash than women, that doesn’t mean that all men drive aggressively. Similarly, some young women also take risks when they’re behind the wheel. AA Drivesafe will identify the safest drivers and reward them.” Graeme Trudgill of the British Insurance Brokers’ Association (Biba) welcomed the AA’s announcement.
He said: “Black box technology can lead to significant discounts of up to 50% on the typical premium, and a new entrant to the market is something to be encouraged.
“Telematics can moderate driver behaviour and help ensure that young people are more likely to drive safely rather than roar around in their cars on a Saturday night.”
The AA’s policy was announced at the same time as satellite navigation specialist Tom Tom unveiled a link up with insurance broker Motaquote to launch Fair Pay Insurance. This involves cars being fitted with a TomTom Pro 3100 navigation device, along with a black box monitoring unit.
Nigel Lombard, managing director of Fair Pay, said the policy was designed for those who believed they were good drivers and felt they could be unfairly charged because of a “so-called risk factor that insurers use to calculate premiums such as postcode, gender, age, vehicle type or an isolated previous motoring conviction, which doesn’t impact on their ability to drive well.”
Biba’s Trudgill warned that different black box insurers have different systems and some are less suitable than others.
“If you do a lot of miles, a black box that is based on mileage would not be the cheapest option – plus the likelihood of you making a mistake while driving is increased the more miles you do. But in general, for young drivers and women, black box technology will be the key factor in obtaining lower premiums in the future.”
But Brian MacDowall, spokesman for the Association for British Drivers, said some drivers who plump for black box technology could face higher costs. “People’s lives are too varied and intersting these days and you cannot programme a car do the exact same thing all the time. You might suddenly need to go out at night and rush someone to a hospital, braking hard at times – anything could happen that could see you break your contract and result in a higher insurance cost.
“Also, it’s not true when insurers say black box technology can improve overall driver behaviour. First, the people who drive really badly will avoid black boxes like the plague, and secondly, driver behaviour will only truly improve if they take an advanced driving course.”
In 2006 Norwich Union, now Aviva, launched two policies using black box technology, but they were withdrawn within two years because of low take-up. This was partly because the technology was very expensive at the time and partly because insurance for younger people cost less then.