Tracking devices: pain or gain?
A vehicle tracking device can save you lots of money on your insurance premium but it may also collect detailed data about your driving habits and places you visit, which can be used against you in the event of a claim.
As insurers can, and do, reject claims because of reckless driving, speeding or driving under the influence, your insurer should tell you if it plans to use data collected about your driving habits at the claims stage.
Three large insurers told Money they discount premiums for drivers who agree to have their driving habits monitored but do not use data collected for claims purposes.
This does not mean, however, that your claim could not be repudiated if you were, for instance, speeding or driving recklessly.
The deputy ombudsman for short-term insurance, Edite Teixeira-McKinon, told Money earlier this year that her office had experienced a spike in claims being rejected by insurers on the basis of reckless behaviour, or reckless driving in motor claims.
The insurers back up their claims with either tracking reports that indicate the speed at which the vehicle was travelling just before impact, or other evidence.
Maanda Tshifularo, the head of Dialdirect Insurance, says Dialdirect has an app that uses telematics technology to monitor driving behaviour and enables policyholders to get up to 75% of their premiums as a cash-back benefit each month.
Car-owner slams tracker as 'spy device'
A Pietermaritzburg man was shocked to find out that the tracking device installed in his new vehicle to meet the conditions of his insurance policy would do considerably more than just track his vehicle's whereabouts.
He discovered that the tracking device would collect data every 30 seconds about his driving habits and this information would be held for three years by the tracking company.
When he asked why a telematics device was being fitted, his broker told him his insurer had the right of access to the information and if he blocked this his claims could be prejudiced.
The man accused the insurer of fitting a tool that could spy on him rather than facilitate the recovery of his vehicle should it be stolen or hijacked.
The vehicle owner also took issue with the fact that his 36-page policy document did not disclose what data was being collected, how long it could be retained or that the insurer had the right to request the tracking information at claims stage.
His broker said his concerns were unfounded and referred him to a general clause in his policy in which he waived any right to privacy with regard to insurance information and consented to the sharing of claims and underwriting information provided by himself or by somebody on his behalf.
The device allows you to participate in managing the risk you pose to the insurer and determine what you pay for your insurance, he says.
Vitality Drive, Discovery Insure's driver behaviour programme, also uses telematics technology to collect driving data but it is optional on all policies.
Precious Nduli, Discovery Insure's head of technical marketing and Vitality Drive engagement, says it is your choice whether you want to be measured and rewarded for good driving.
Philippa Wild, the head of commercial lines at Santam, says Santam does not require clients to have telematics devices.
On certain Santam policies, you get a discount for having such a device in your vehicle, but it does not affect your cover in any way, she says.
Tshifularo says that telematics techno-
logy provides a financial incentive to drive carefully and make the roads safer. This is in the best interest of all road users and allows the insurer to offer you a premium saving.
But all three insurers say that they will not use the data collected to repudiate a claim and will only use the data if you give permission.
Tshifularo says Dialdirect can use data collected from a telematics device to speed up the claims process but the data collected will in no way influence the outcome of a claim.
"The telematics data will not be used to determine whether a policyholder is at fault since the purpose of the product is to cover the insured whether 'at fault' or not," he says.
Similarly, Wild says Santam will not repudiate a claim based on driving behaviour data collected by a telematics device.
The Financial Sector Conduct Authority (FSCA), which regulates the financial sector, says the data an insurer can collect, and what it can use it for, depends on what is agreed in the contract with the client.
Kedibone Dikokwe, divisional executive: conduct of business supervision, says if your insurer explicitly makes it a term of the
contract that you must install a tracker or telematics device, you can either accept or shop elsewhere for a policy that does not have this requirement.
Vehicle location is one thing, driving habits another
Insurers regard some vehicles as high risk due to the likelihood of theft or the high claims value if the vehicle is stolen. An insurance company may stipulate that it will cover your vehicle only if a tracking device is installed and is within its rights to do this, says Precious Nduli, Discovery Insure's head of technical marketing and Vitality Drive engagement.
A standard tracking device uses radio signals to monitor the location of the vehicle and facilitate its recovery if stolen. This device does not collect data.
A telematics device, on the other hand, works off GPS and cellphone technology. It can monitor driving behaviour and record information such as speed, mileage driven, how fast you accelerate and how often you brake, Nduli says.
Some tracking devices have telematics technology but the tracking company does not collect additional information as the insurer only requires the location of a stolen vehicle, Nduli says.
Some insurers allow policyholders to contract out of this condition but then premiums may be higher in line with the increased risk assumed by the insurer.
The insurer has the legal right to use the data collected to repudiate a claim as long as it is clearly disclosed as a term of the contract that is agreed between you and the insurer, Dikokwe says.
But she stresses there should be clear disclosure before, during and after an insurance policy is concluded regarding all the insurer's requirements, material information, and the responsibilities and rights of each of the parties. She says as a policyholder you must give consent for the service provider that monitors a telematics device on behalf of your insurer to gather and save your data.
Wild says Santam believes that when an insurer is actively measuring your driving behaviour, it should disclose what driving data is being collected and for what purposes. The insurer should also say for how long it intends holding on to your driving data, she says.
Typically, you buy a tracking device from a company that is independent from the insurer and your broker. The terms and conditions of purchase, as well as the functionality and data implications of the device, should be provided by this company, she says.
If your insurer uses some data relating to your driving, it should set out in your policy how it can use that data but it can't disclose the policy of the tracking company, she says.
Nduli says Discovery Insure stipulates in contracts with policyholders that it will not use telematics information to repudiate a claim. "We will only use it to confirm the time and place of an incident," she says.
"We provide information on data collection and what it can be used for to both brokers and policyholders."
Dikokwe says the cases in which the FSCA has found insurers used driving data collected by a telematics device to verify a claim are those where the insurer suspects fraud or material misrepresentation of the facts. Driving data is not used to reject claims in general, she adds.
The FSCA believes that the collection of driving data is a material term of a contract and both brokers and insurers should provide such information to policyholders, Dikokwe says.