Should I Sign Up for a Telematics Discount Program?

Insurers calculate your premium based on the risk you pose to the company, which they determine using various data points. Typically, that includes some basic demographic information, such as your age, as well as your driving record, like whether you have a history of car accidents or DUIs. Teen drivers, for example, are much more likely to get into accidents, so insurers charge them higher premiums to account for that added risk.

However, newer technology has allowed insurers to actually track how you drive so that they can get a clearer idea of your driving behaviors. For example, do you brake suddenly? Speed often? All of this information can help build a much more accurate picture of your risk than standard rating factors alone can.

Telematics programs use mobile apps, Bluetooth or plug-in devices, or data that’s collected by your eligible connected car to monitor your driving and adjust your premium based on your demonstrated risk. The collected data may include metrics like

• Acceleration and braking
• Speeding
• Most frequent driving times
• Mileage
• How often you’re distracted by your phone while driving
• How well you handle corners

For example, State Farm’s program connects a Bluetooth beacon, like the one pictured, to your phone to track your driving:

If you’re a safe driver, this can end up saving you a lot of money — telematics programs essentially provide you with a way to prove yourself to your insurer. These data collection methods aren’t perfect, and many policyholders complain of inaccurate results, but most drivers who sign up for telematics programs still end up saving money.

Telematics can offer significant savings on your premium — most companies give you a discount just for signing up for the program, along with a higher discount at your next policy renewal. You won’t know your full discount until your insurer has been able to collect driving data.

Here’s a look at the potential discounts advertised by the most popular telematics programs:

Enrolling in a telematics program can save you money, but it may not be ideal for everyone. Here are some things to consider before signing up. 

Driving Behavior

Most people tend to think they’re good drivers, but it’s important to carefully and honestly consider your driving before signing up for a telematics program. When it comes to these programs, what matters most is whether your driving is considered safe by the insurer’s tracking standards. That includes limited hard braking and fast acceleration, no phone use while driving, etc. 

You may also choose to approach the program as an opportunity to develop better habits and improve your driving. If you are willing to adapt your driving habits, a telematics program can be a great and helpful option.

Also, keep in mind that some programs require all drivers on the policy to participate, so you should consider who else will be driving when weighing whether it makes sense to sign up.

If you’ve determined that you’d like to participate in your insurer’s telematics program, signing up is simple. Depending on the company, you may need to speak to your agent to have them enroll you, or you may be able to sign up directly from the company’s mobile app.

Either way, you will need to download the app and complete the setup process, which includes enabling certain phone settings like location services. Once it’s set up, it will start tracking your trips, and you’ll be able to access trip details in the app.

If you’re unsure about signing up for a telematics program, there are other alternatives that come without the privacy invasion and risk of rate increases.

• Traditional safe-driver discounts: Many insurers will lower your rates if you have gone three to five years without any accidents. Your rates may drop even further if you complete an approved defensive driving course.
• Low-mileage discounts: If you drive very little (usually less than 7,500 miles per year), you may be eligible for a discount. This is a great option for remote workers and retirees who don’t need to commute.
• Pay-per-mile insurance: Some companies offer specific pay-per-mile insurance programs, which take an à la carte approach to insurance: you pay for insurance on a per-mile basis, instead of a standard flat rate for unlimited mileage. That way, you essentially only pay for the amount of insurance that you actually use.

Telematics programs can be beneficial for many drivers, offering significant savings for safe driving. However, they come with real privacy concerns, so drivers should be aware of what they’re signing up for and weigh their individual data privacy preferences against potential savings. In addition, some programs can actually increase rates if they detect unsafe driving, making them more risky for those who are not confident in their ability to drive safely.