It might feel a bit ‘Big Brother’ but a black box in every car would be good news for insurers and drivers alike

It’s not often that insurance sees a genuinely revolutionary technological innovation. But the initiative by BMW to introduce telematics technology into all of its new vehicles could be a transformational moment for the motor insurance market.

Telematics had a false dawn in the mid noughties with Aviva’s abortive experiment to introduce its black boxes into the UK’s cars. But interest in telematics has revived in the wake of the European Court of Justice’s gender discrimination ruling earlier this year, which looks set to result in steep hikes for younger female drivers. The Co-op’s director of general insurance David Neave is pleased with the mutual’s own telematics-based young drivers product, as he explains in this week’s interview.

Now BMW’s initiative could remove many of the hurdles standing in the way of a widespread application of telematics technology by shifting the risk from the insurer to the manufacturer. BMW’s thinking appears to be that telematics will be as common as the sat nav in a decade’s time, so it makes sense to steal a march on its competition, while burnishing its ‘safety first’ credentials.  

Telematics offers further advantages. No longer will insurers have to rely on the relatively crude measurement of whether their customers make a claim: telematics should be grist to the underwriter’s mill, enabling far more sophisticated rating judgments.

Some may worry about the ‘Big Brother’ implications of every car being installed with a black box. But these doubts may be quelled if the result is significantly lower premiums.

The trickle of insurers adopting telematics is far from becoming an avalanche just yet. But with the likes of Budget entering the fray, momentum is certainly gathering. So far, none of the big boys of insurance have re-entered, but it can only be a matter of time before they do.