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New Technology Could Affect the Cost of Car Insurance

Over recent years, technology has exploded, changing the way we live and work. Today consumers can order groceries online, and have them delivered at home within two hours. Or, you can walk into a store, grab what you need, and walk out without standing in a checkout line. You can track your loved ones’ movements via cell phone GPS, and self-driving cars are being tested.

That’s all just the tip of the iceberg, as you probably know. The newest technologies are often complex and futuristic, and yet some of them are surprisingly simple.

“Surprisingly simple” certainly applies to one innovation, which is aimed at using your own driving habits to help determine your car insurance rates. Doesn’t that make more sense, than relying upon merely the times you’ve been “caught” (via traffic tickets), or assuming that all drivers within a certain demographic exhibit the same habits?

It’s called telematics, and it’s just a small device that is installed in your car, that communicates your driving habits to your insurance company. At first you will pay your standard car insurance rate, but after driving with the installed device for a set period of time, your actual driving habits will begin to influence your future premiums.

The device measures data such as number of miles driven, where the vehicle is driven, time of work commutes, your speed, hard brakes, and airbag deployments. This data helps insurance companies determine your true risk of being involved in an accident. Those with riskier driving habits might pay higher premiums, whereas safe drivers are rewarded for their good behavior.

Use of a telematics device is not available in all markets, and might not be right for those who are squeamish about sharing too much information. However, it’s definitely an interesting trend that we will be watching, and we’ll update you on how this technology continues to change the car insurance landscape.