Archive for October 2012

Is Car Insurance Telematics Black Box Technology Penalising Good Drivers?

Car Insurance telematics, often known as in-car black box technology, has been hailed this year as the panacea for all the ills of insuring young drivers and claims to offer this class of driver cheaper car insurance.

The technology works by having a ‘black box’ fitted under the bonnet of the insured vehicle which measures the drivers performance and sends data using a variety of techniques, to the insurer for analysis and pricing.

Premiums are initially charged using known risk data and rating factors and then adjusted up or down over the course of the policy life. Many large car insurers have adopted the technology in a bid to win a larger share of this lucrative yet risky end of the market and in many cases premiums for young drivers have been reduced.

However questions are now starting to be asked about the accuracy of the data and the consequent pricing models.

The typical system works by measuring location defined by GPS, the time of day and certain performance related measurements for acceleration, speed, cornering and braking. A scoring method is applied to each of these criteria to determine the drivers performance and additional premium or future discounts are applied dependent upon these scores.

Clients can then access their account either online or via a mobile phone app where they can see how well the insurance company thinks they drive and discover whether they will get a refund or be charged more. The customer application often known as a dashboard shows the drivers perceived peformance in a colour coded Green – Amber – Red layout with performance rated from 1 bad to 5 Angelic.

However many drivers are now complaining about the fairness of the system and the measurement and charging methods and this week the BBC Radio 4 consumer complaints program ‘You and Yours’ reported on the growing number of dissatisfied drivers.

One particular interviewee a Mrs Bev Stainsby took out Co-operative car insurance at a cost of £1100 to cover herself and her young son using the telematics system. The car was driven for a short period of time by the youngster before he went away to university. Since then the car has been driven exclusively by Mrs Stainsby who when she took over usage noticed that the dashboard scores were declining and further charges might have to be paid. She only uses the car to commute 20 miles per day on a straight road and was horrified to notice that the system was penalising her driving particularly for cornering and braking. She doesn’t trust the calibration of the telematics and upon enquiry was fobbed off by the insurer with the excuse that the scores are averaged over the year. A spokesperson for the company admitted that insurers adjust the basic system scoring against known data collected from its other drivers using the boxes, but defended the performance calibration. Mrs Stainsby is not happy! The program is available to listen to on BBC iplayer for a short period of time.

Steve Davis of online specialist car insurer said “Although the telematics driven policies can have benefits to both the driver and the insurer, the systems are still in their very early stages of development and there are some large concerns that customers should be made aware of. In particular the question of privacy.”

“The system allows insurance companies to completely profile your lifestyle, way beyond your driving skills. It allows them to see exactly where you go, who you visit, when you go out and also classifies you as a certain type of driver which may adversely affect you in the future.  Clearly there are problems with insurers adjusting the calibration scores and until a defined set of  performance skill scoring is adopted across the industry, many drivers will be financially disadvantaged by belonging to the ‘wrong’ pool of drivers defined by a particular company’s dataset.”

“Furthermore, where multiple drivers have access to the same vehicle, the data cannot be trusted as a definition of risk and pricing anomalies are bound to occur”

RBS Sells Off Direct Line Insurance Cheaply!

City Analysts are stating that the flotation of  government owned Direct Line is priced well, as the share price is up 7% today on the grey markets from the initial offering of £175 per share. The official floatation is not until the 16th of October.

However this begs the question that the company is being sold cheap and the taxpayer losing again.

The UK government has pumped more than 21 billion pounds into RBS, and the insurance side is one of the most profitable areas.
The Stock market listing of the company, which also owns the Churchill and Green Flag brands,  is the largest in London this year.
Private investors have been less sceptical about the float than other institutions.

At 175p a share, Direct Line would have had a market value of £2.63bn, which is much is lower than a £2.8bn-£3.5bn value placed on the insurer by the IPO advisor. Clearly the private investors see a quick profit to be made.

The future of the Croydon based company, which invented call centres, might appear rosy to those looking to make a quick buck, however the UK car insurance market is already saturated and the competition enquiry into car insurance might crimp future profits, however the brand under new management has been seen to perform well over the last two years.

Does your BMW Car Insurance actually cover you for theft?

If you own a recent BMW car you may be surpised to find that it’s not actually covered should you fall victim to theft and try to make a claim.

The problem stems from the on-board computer and the associated key-fob technology which allows car thieves easy access to your vehicle.

Technology has been widely available and can be obtained on the Internet, that allows would be thieves to tap into diagnostic system of the on-board computer and clone the key technology, allowing easy access to the car.

The problem has been exacerbated by recent EU competition directives that allow non BMW garages the ability to access diagnostic systems.

West Midlands police have reported 154 thefts of BMWs with this technology in the last three months.

The Government sponsored company responsible for setting the insurance security rates Thatcham Research for members of the ABI reported the problem to insurance companies  over nine months ago. They have refused to downgrade the 5 star security rating of the affected models as they state this would be unfair to the manufacturer.

The BBC has been leading an awareness campaign for owners of these BMWs with its consumer affairs program Watchdog and Radio 4.

Speaking on Radio 4 a Mr Gordon who is a director of Southampton Football Club said he was treated like a criminal by his car insurance company LV after he made a claim for theft. Despite having both keys in his possession and a CCTV tape he managed to secure from close by to where the car was stolen from he claimed that LV  inferred that he was party to the theft. They sent out a private investigator to interview him and  treated him as a suspect. It took them 9 months to finally settle claim, only paid out the minimum amount which was a lot less than the cars value and he lost his no claims discount.

When contacted BMW suggested that any concerned owner should contact their  dealership and fit secondary security devices such as steering wheel crook locks.