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Putting a black box into your car could save you a substantial amount of money on your premiums. We describe the six types of drivers who would benefit from the device

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Black box insurance, where premiums are based on your driving behaviour, is popular among young drivers trying to reduce the cost of cover, but motorists of other ages can also benefit.

This type of insurance is otherwise known as “telematics” cover, and involves a black box being professionally installed in your car. The box monitors how and when you drive and relays this information back to the insurer, which then calculates your premiums based on the data it has received.

Here are six types of driver who could benefit from having black box cover:

Young drivers

Young drivers aged between the ages of 17-24 are statistically the most likely to be involved in a car accident, which means premiums can be sky-high. According to the Association of British Insurers (ABI) drivers in this age group are three times more likely than drivers of other ages to be responsible for “catastrophic claims”.

Back box insurance enables insurers to tailor premiums to suit each individual based on their driving habits, rather than relying on statistics alone to determine the cost of their cover. So provided young drivers can demonstrate they are responsible motorists, premiums will be lower than they would be if they opted for conventional cover.

New drivers

If you’ve only recently passed your driving test, and therefore have limited experience on the roads, you will also be considered high risk by insurers, regardless of your age. Telematics insurance could help you pay cheaper premiums as premiums will be based on how and when you drive, so the safer you are, the lower your premiums will be.

Low mileage drivers

If you only drive a few miles every so often, it doesn’t make sense to pay the same insurance premiums as someone who drives 10,000 miles or more every year. Many black box policies allow you to choose exactly how many miles you’ll drive, and use this information to help work out your premium. If you don’t exceed this number, then you won’t have to pay any extra.

A spokesman for black box insurer Insurethebox said: “For those drivers who need to travel further, top up miles are available in bundles of 250, 500, 1,000 or 2,000 miles.”

Similarly, Coverbox’s “pay as you drive” scheme, also allows you to buy more miles if you underestimate your annual mileage.

Careful drivers

If you pride yourself on being a particularly safe driver, black box insurance could potentially reward you with lower premiums. For example, with black box cover from Ingenie, every three months your policy is reviews and a discount is applied if you’re driving well. Ingenie claims that 70pc of its customers have received a good driving discount.

The AA’s Drivesafe policy assesses how you anticipate traffic and follow the landscape, so the better you drive, the lower your premiums will be.

Slow drivers

Black box insurance is not for boy racers. You don’t have to crawl along the roads, but you must always stick within speed limits. Remember that speed can be assessed in other ways too. For example, if you take corners too sharply and are braking while doing so, this could work against you if you have a black box installed. Similarly, you’ll need to take care not to accelerate too fast away from traffic lights or to brake hard when you see a traffic jam in front of you.

Daytime drivers

Driving late at night or in the small hours is considered much riskier than driving during the daytime. This means drivers with black box insurance are likely to see premiums rise if they regularly drive at night, while some such as iKube and Co-op, have curfews so that if you drive late at night you could be fined or see premiums rise. If you tend only to drive during the day, then black box cover could be for you as you will be rewarded for driving during “low risk” periods.

For a while, some insurance companies have been encouraging teenagers to get a little black box in their cars. But how do they work, and will everyone soon have one?

For many young people, getting their first wheels is a rite of passage, a path to independence, the precursor to flying the nest.

But with one in five young drivers having an accident within their first 12 months of being on the road, insurance premiums are high. Many look to ways to reduce their costs.

It has led to the rise of what is known as the little black box, which motorists are installing in their cars to prove they are a good driver, in the hope they see insurance costs drop.

The British Insurers Brokers’ Association (Biba) says sales of motor insurance policies which use “black box” technology, called telematics, have increased fivefold over the past two years.

It says it can knock 25% to 30% off policies, saving some young drivers up to £1,000.

Critics say they cost too much and civil liberty campaigners have expressed concern about the potential for invasion of privacy, or data incriminating drivers.

So how does telematics technology work, and what do these black boxes record?

Typically the boxes are placed inside a dashboard and are able to monitor things such as speed, acceleration and braking, and the times of the day that the cars are on the roads.

The safer the driver, the better the score and the lower the insurance premium.

But prices can go up as well as down. If the analysed information shows examples of poor driving, such as fast cornering or doing wheelies, the black box will also pick that up.

Nick Moger, one of the founders of Young Marmalade, which offers a young driver insurance scheme with telematics technology, says his company uses a green-orange-red system to monitor driving, emailing drivers to alert them when they have picked up bad driving.

“The very first time, they get an email to say they are driving erratically, if they ignore that then they get another email to say you are on probation for 30 days and if they continue to drive badly we increase the premium by £250,” he says.

Manufacturers are convinced highlighting poor driving patterns can improve driving behaviour and reduce the number of accidents.

“It has been proved in Italy – where they are probably the leaders in Europe in accident rates – their rate has dropped by 16% by having black boxes,” says Moger.

More than 600,000 cars in Italy are believed to have the devices, many more than in the UK. But Biba expects 500,000 UK cars to have them by July 2014.

Nicole Darbyshire, a 20-year-old nursery nurse from Bolton, has already signed up to the system.

After passing her driving test in April, she says the cost of a car and its associated insurance was “a big worry” before she discovered that telematics could help reduce bills.

“For the first month, I was really aware of the box, and if I accidentally sped, I’d brake really quickly. Now I tend to forget it’s there.

“I can log onto my account online and see how I am driving. It shows when I’ve over-accelerated – it has pictures of the street which is a bit strange. So far I’ve been 97% green, so that’s good. I’ve got more relaxed about checking now as I know it will email me if I do anything wrong,” she says.

But not everyone is so relaxed about signing up to this sort of surveillance.

Taylor Brown, 21, says he thinks his insurance company already has enough information. “Why should I then tell them what I’m getting up to – Big Brother Britain and that, but you know, it is up to me where I go.”

Joe Johns, 18, doesn’t like the idea either. “It would be like being on a driving test 24/7. You’d always have someone monitoring you about how you’re driving, your foothold, your braking. I just wouldn’t fancy it.”

Firms such as Coverbox, iKube, Co-operative Insurance, Swinton and the AA now offer insurance schemes with telematics for young drivers.

The AA, which stores a small electronic box under the bonnet transmitting data via satellite to the company, says savings of up to £850 can be achieved when compared with standard inexperienced driver policies.

And the boxes aren’t the only devices that incorporate artificial intelligence as an aid to monitor and control a young driver’s behaviour.

Insurance firm Aviva has launched a new pay-how-you-drive smartphone app which could offer drivers savings on their car insurance premiums, based on how they drive.

Motoring journalist Paul Horrell says the devices are part of a wider trend that is seeing insurers and manufacturers try to incentivise or coerce young drivers into being more careful.

He cites a Ford product in the US called MyKey, which allows a master key to set various limits – such as maximum speed or audio – on the vehicle.

Volvo’s Alcoguard monitors alcohol levels. It will not start until a driver has blown into a unit, which transmits the results via radio signal to the car’s electronic control system. If a blood-alcohol limit of 0.2g/l is exceeded, the engine will not start.

And DriveCam, which was developed to help organisations with fleets of drivers, like haulage companies, monitor their drivers’ performances, uses a system which relies on two cameras – one pointing at the road, and one monitoring the driver – to record instances of bad driving such as texting or tailgating.

So might everyone soon have a little black box, or something similar, in their car?

Horrell says it is often parents that are particularly attracted to devices such as little black boxes. But he thinks it is unlikely that everyone will subscribe to such surveillance.

We are definitely going to have more behaviour-based motor insurance in the future”

“If people are willing to submit to this kind of observation, they are probably the kind of people who are willing to behave more responsibly.”

Graeme Trudgill, head of corporate affairs at Biba, says although he expects to see a significant increase in the number of little black boxes in the young driver market over the next couple of years, it would not be economical for all insurance companies, and all age groups, to go down this route.

In many ways the future depends on technology, he says, as it depends on what happens with smartphone apps such as Aviva’s, which are cheaper than having a box fitted. And in the next couple of years, vehicle manufacturers are also going to be required to install emergency call buttons, which will transmit GPS signals and have the potential to use telematics.

“What is clear is that we are definitely going to have more behaviour-based motor insurance in the future – and young drivers are going to still be the primary market,” he says.

Adeola Ajayi, from the Association of British Insurers, says riskier or more dangerous drivers are likely to be the ones who are the most resistant.

She thinks there will be a spike in the number of young female drivers opting for a black box after 21 December, when an EU ruling which bans insurers from taking gender into account when setting premiums comes into effect.

“Female drivers, who are statistically safer, have benefited from cheaper insurance in the past, so these might prove popular with them.

“Others are simply keen to do whatever they can to get a premium that reflects their exact risk, and this is a way of getting more insight and rewarding customers,” she says.

www.thedrivingskool.com

Driving lessons, the test itself, buying and insuring a car all add to the expense, but there are ways to limit the damage

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Passing your driving test has long been seen as a rite of passage, but the rising cost of running a car is driving more and more young people off the roads. The Department for Transport’s recent National Travel Survey shows a sharp drop over the past 18 years in the number of young people holding a full driving licence. While in 1995, some 43% of 17- to 20-year-olds held a full driving licence, that has plunged to just 31%. The fall is sharpest among young men, where it has dropped from 51% to 30%, while the percentage of young women with a full driving licence has slipped from 36% to 31%. Over the same period the proportion of 21- to 29-year-olds with full driving licences has also fallen.

The main reason fewer young people are driving is cost, says Stephen Glaister, director at the RAC Foundation. “Younger people were hit disproportionately hard by the downturn. Even though employment is now rising, incomes are stagnant, and many are only in part-time work, and find running a car too expensive.”

Spiralling student debt and rising housing costs leave little money for driving lessons, at around £25 an hour, and the test itself. With the practical test costing up to £75, and the theory test adding another £31, the cost of buying a car is the least of the problems facing young drivers. In 1995 a five-year-old Ford Fiesta, a typical first car, cost £3,250, against £5,510 today, according to figures from motoring guide Glass’s. That is a rise of nearly 70%, almost exactly in line with the increase in average earnings over the period, says Andrew Jackson, head of analytics at Glass’s. “In real terms, the Fiesta isn’t any more expensive than it was in 1995, even though the materials, technology and manufacturing quality are incomparably better.”

Other motoring costs have accelerated sharply, according to the RAC Foundation’s UK Cost of Motoring Index. While the cost of living has risen 76% since 1995, as measured by the retail price index, the cost of maintaining a car has risen 140%, while petrol and oil costs have increased 145%. Meanwhile the cost of tax and insurance has soared by 170% since 1995, well over twice the rate of inflation. The average 17-year-old now pays a hefty £1,997 a year for motor insurance, according to figures from Towers Watson and comparison site Confused.com.

Here are some ways to make getting behind the wheel more affordable.

• Buy a small car

As a general rule, the less powerful your car is the less it is likely to cost to insure, says Lee Griffin, car insurance expert at GoCompare.com. “Young or inexperienced drivers should therefore look at cars with smaller engines as opposed to performance vehicles. But this isn’t the only factor they take into account. They will also look at its value, engine size, power-to-weight ratio, and availability of parts. These factors determine which insurance group the car will be in, and how much it will cost to insure.”

• Shop around

One in three car insurers wouldn’t cover a 17-year-old driver at all, while 10% wouldn’t cover anybody under 25, according to GoCompare.com. “All insurers rate drivers differently, and while some target older, more experienced drivers, others will price competitively for younger drivers, so shop around to make sure you’re getting the right cover at the best possible price.”

An online search for an 18-year-old motorist covering an eight-year-old Ford Fiesta Freedom with a 1.3 litre engine, with 10,000 annual mileage and a £250 excess, showed the cheapest premium at £2,917 a year from Carrot Car Insurance, a telematics-based insurer that targets younger drivers. Next was Hastings Essential, which quoted £4,129 a year. Insure Pink, 1st Central and Go Girl offered quotes ranging from £4,634 to £5,000 a year. Some insurers charged up to £9,000, while many didn’t quote at all.

• Get better qualified

You may be able to get a slightly lower premium if you have taken advanced driving courses such as Pass Plus or the advanced driving test from the Institute of Advanced Motorists (IAM). If that 18-year-old had Pass Plus, for example, Hastings Direct would cover them for £2,240, but the next best quote was from Insure Pink at £4,147.

• Secure your vehicle

Fitting your car with an approved alarm, immobiliser and tracking device can make life harder for thieves, reducing the chance that you will make a claim for theft. “It helps if you can park off-road overnight, preferably in a locked garage or at least on a driveway, as your insurer may reduce your premiums accordingly,” says Kevin Pratt, car insurance expert at MoneySupermarket.com.

• Add an older driver to your policy

Adding an older, “safer” driver, such as a parent or relative, will cut the cost of your insurance policy, Pratt says. “You must list the person who drives the car most as the main driver, otherwise you may be accused of ‘fronting’. This is treated as insurance fraud and will lead to a minimum £300 fine plus six points on your licence. It will almost certainly cost more to get insurance in the future, if you can get it at all.”

• Try telematics (Blackbox)

Telematics technology can also help young motorists drive down their premiums. This involves fitting a gadget in your car that measures your speed, cornering, acceleration and braking, as well as your location and the time of day you drive. If the black box judges you to be a safe driver, your insurer should reward you with a lower premium. If you’re taking risks, however, your premium could increase.

A 17-year-old student living in Cardiff driving a two-year-old Ford Fiesta, with no claims or convictions, annual 7,000 mileage and a £250 excess, would typically pay £2,124 a year for standard insurance, but this would fall to £1,783 with Telematics, according to figures from Confused.com. That’s a saving of £341, or 16%. A 20-year-old with three-years’ no-claims bonus would typically see their premium fall from £780 to £601.

• Drive safely

If you’re a young driver with points on your licence or a recent insurance claim to your name, you’re in double trouble, says Pratt. “Driving with care is the name of the game. Points on a licence can easily add 10% to your insurance costs, so avoid speeding and other convictions.” Young drivers should avoid making insurance claims, so they can steadily build up a no-claims discount – this can knock up to 75% off the cost of cover after five years.

www.thedrivingskool.com