Telematics-based car insurance is where the driver lets their insurer track their driving through an app or by having a “black box” fitted in their vehicle. The insurer usually offers cheaper insurance for careful driving as the policyholder is considered a lower risk.

Initially these products were targeted at new and young drivers who usually pay the highest premiums as they are considered a high risk. However, Defaqto said this appears to be changing as older and lower mileage drivers are also now being targeted.

In the past three years, the number of telematics products available on the market has more than doubled. Today there are 55 telematics products available compared to just 25 in 2016.

Another significant change is that drivers no longer necessarily need to have a device fitted in their vehicle. In 2016, all 25 products had a “black box” device fitted to the policyholder’s car which would send data back to the insurer. Today, only 53 per cent of policies (29 out of 55) require a black box to be installed.

The others offer motorists a range of telematics options such as a “plug and drive” system where the device is sent to the policyholder to “self-install”, or a smartphone app. Some policies offer a choice of tracking devices.

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Mike Powell, insight consultant at Defaqto, said: “Telematics policies have done a lot of good in encouraging young and new drivers to develop good driving habits. Some policies include online dashboards that allow the driver to review their driving and become better drivers. Most black box policies also include theft tracking devices and accident alert systems, which is a great added bonus.

“As with all car insurance, it’s important to get the right cover for the motorist’s needs. Consider the cover that the policy offers, the limits on the cover and any excesses. It’s important to check for any additional charges and installation costs, which can be steep. Telematics policies aren’t right for everyone but if you are a careful driver and are happy to let your insurer track you driving habits, they may be right for you.”

How to choose the right telematics policy

• Look at the actual insurance cover itself: Does it have the right cover for your needs? What are the policy claim limits and any excesses?
• Look at the telematics options offered, e.g. black box or mobile app.
• Look at any set up costs, such as installing the device and any costs for cancelling cover, or having the device removed at the end of your policy cover.
• If you looking to change your car in the future, check any costs involved as some providers may charge to have a new “black box” fitted.
• Check to see if your insurance provider includes an online “dashboard” which allows you to check your driving score and any potential rewards for careful driving.
• Check what happens if you need to make a claim.