Telematic Insurance Cover - Research Paper Example

? Insurance Part A:Telematic insurance cover With technology improving each day , insurance companies have decided to make the most of it and take advantage of telematic technologies. Telematics insurance cover incorporates the use of GPRS tracking services thus the ability of monitoring the movement of a car (Mukilski 2010). There is also integration of cell phones into the vehicle system thus making it easier to access phone services while driving. Telematic insurers also have a policy where they reward low risk drivers with the access of lower premiums. However, this means that high risk drivers will have a hard time because of the rules that involve them paying penalties when they stretch their limits. This insurance mostly targets young drivers because they are inexperienced and reduces their chances of getting into road accidents (Avery, 2011). In most cases, young people, both male and female, usually lack a sense of responsibility especially when they know that they have parents or guardians to take care of them. This is a moral hazard since these young people have a tendency of taking adverse risks because they know that they will not incur the cost of the damages they cause. Young men are known for engaging in risky behaviour such as drunk driving, overspeeding, and ignoring road signs. This puts them on the high premium section because they are high risk insurance buyers (Telematics insurance, 2012). Young women, on the other hand, are known to be more careful because they pay attension to the roads as they drive and are keen on observing road rules. This means that young female drivers are bound to benefit more from telematics insurance than their male counterparts. Conforming to the provisions of telematic insurance policies gives the young female drivers an opportunity to enjoy low premiums thus lower insurance costs (Wright, 2012). However, being young, both men and women are bound to make the same mistakes that could cause accidents in which the car gets damaged or they damage other people’s property. They do all this because they know that their parents pay the car insurance and, therefore, they behave recklessly. However, there comes a time that they have to be responsible for their actions and this involves paying for their car insurance. This prompts for the selection of an insurance cover that takes care of their needs wholesomely. Telematic insurance promises rewards for its most careful drivers, and this could encourage careless young drivers to be more careful and abandon their moral hazard so as to increase their chances of getting rewards. Telematic insurance is known for its use of technology gadgets which are pricy especially to the young vehicle owners interested in buying insurance cover. Most of the information given to the buyer is about the use of up to date technology to recover lost vehicles and to help drivers avoid accidents. However, the user is not aware that these gadgets are expensive and contribute to the charges of the insurance cover. This is a case of adverse selection because one party is withholding information from the other. The fact that this cover contains rewards in its package only serves to attract clients and to prompt them to be careful while driving (Wright, 2013). When young people realize that their risky behaviour result in loses, they might opt to get an insurance cover thus research for an insurance cover. A standard insurance policy requires all those buying insurance to pay for a certain standard amount. This means that females, who are less likely to damage their vehicles have to pay more. In any case they might not even use the cover after all because chances of them getting into an accident are very low. Male drivers, on the other hand, tend to get into accidents and the amount females pay may just subsidize that used by the younger males. In addition, insurers do not reduce the price of insurance cost for young female drivers just because they tend to use it less often. In fact, insurance costs keep going higher with the increasing risk and this is something young drivers take no notice. Part B: A Report on telematic insurance, its advantages and disadvantages to young drivers. Executive Summary This report aims at helping two friends of mine, a lady and a man both studying in a UK university. The two young drivers are not related at all but both have an intention of purchasing their own motor insurance for 2013. The lady owns a fairly new Ford Focus and the young man owns a 15 year old Ford Moreno. These two requested for a report that would help them understand more what telematic insurance policy is, its disadvantages and advantages. Having done the investigation, the main findings were that telematic insurance cover has fairly more advantages than disadvantages to young drivers. I, therefore, came up with the conclusion that telematics is a technology that is increasingly going to shape the future of insurance. According to AA insurance, I recommended my two young friends to get telematic insurance cover. Outline 1. Introduction Background Objectives Scope 2. Findings 3. Conclusions 4. Recommendations 1. Introduction Background This report has been written to explain what telematic insurance policy is , its advantages and disadvantages to new young drivers who want to purchase new motor insurance. It was requested by my two female and male friends who needed to understand the above stated topic. Objectives The objectives of this report is to make the two young drivers understand the policy in question and at the end of the day make an independent decision on the purchase of a new motor policy. Scope This report examines the development of telematic insurance and how it will enrich the lives of the holders of the insurance policy. It does not concentrate on how the policy might be a disadvantage to the policy holder. 2. Findings Findings show that telematic insurance policy is a new type of insurance cover that allows the insurance company to use GPRS installations and other tracking devices to keep in contact with the insured vehicle. However it is most likely to favor the young female drivers than the male drivers due to the difference in behavior. Young male drivers tend to be more careless than the young female drivers, although as a group they may suffer the same consequence due to the lack of road discipline. It is evident that insuring an old car would cost more compared to insuring a fairly new car due to the number of installations required (Association of British insurers, 2013). In an old car which does not come with in built tracking devices, it would mean installing new once while a new car with in built gprs from the manufacturers would require minimum if not at all any installations. The major finding however was that with telematic insurance policy, a driver is almost certain to recover a stolen vehicle due to the tracking ability. 3. Conclusion In conclusion, telematic insurance policy can be appealing to many young drivers but might be a double sword to them. This because they are required to follow a set of requirements, something young people are not good at doing. But again, it is the reward that comes with telematic insurance that will mold a young driver. No one wants to pay high insurance premiums especially when they are still in school and are jobless. The benefits of telematics make this insurance cover desirable because of the up to date technology involved. 4. Recommendations The most important factor to consider now as a young driver is the cost of the premium rates. Having detached from parents' policies it is important for the youth to save and opt for an affordable policy. The telematic insurance is appealing but it requires one to exercise a lot of discipline with the car when on the roads. One should not leave this cover only to buy another one which does not care about one's driving and will still be expensive. In fact, compared to the old traditional insurance policies, the premium will be recalculated on an often basis. I recommend the telematic to the young female driver even if she stands not getting the reward due to the nature of young drivers being reckless drivers. Considering the young generation culture of addiction to phones, telematic insurance cover is the best option for the young drivers. However I would recommend the young male driver to find another insurance cover option, because of the high cost he would incur to set up a telematic insurance cover. Since he is still a student, it would be manageable to get the normal insurance cover and get a secondary gprs set up. Although they can be a distraction, the wireless phone capability would give a young driver all the time they need to talk on the phone while driving. Although this might come with its own repercussions, it reduces the number of accident and fatalities on the road. References Association of British insurers (2013) What does motor insurance do. [Online], Available at: http://www.abi.org.uk/information/consumers/general/what_does_motor_insurance_do.aspx [Accessed: 14 Mar 13]. Avery, L. (2011). How ‘black-box’ means cheaper car insurance for young drivers. [Online], Available at: http://www.confused.com/car-insurance/articles/how-a-black-box-means-cheaper-car-insurance-for-young-drivers [Accessed: 14 Mar 13]. Corporation Ltd. Essvale Corporation Ltd. (2009) Business Knowledge for IT in Insurance. London: Essvale Corporation Limited. Mikulski, J. (2010) Transport Systems Telematics: 10th Conference, TST 2010, Katowice - Ustron, Poland, October 20-23, 2010. Selected Papers. Berlin: Springer. Telematics insurance, AA. (2012) Insurance for young and newly qualified drivers facing high premiums.[Online], Available at: www.theaa.com/insurance/telematic-insurance [ Accessed: 14 Mar 13] Wright, M. (2013) Vehicle tracking and vehicle telematics explained. UK Telematics Online. [Online], Available at: http://www.uktelematicsonline.co.uk/ [Accessed: 14 Mar 13]. Read More