What Is Telematics Car Insurance, and Why You Might Hear More About It in 2024

Are you tired of paying high prices for car insurance? What if I told you that you could save up to 40% on car insurance just by using a mobile app on your phone? That's right -- there is a surprising way to save money on car insurance that most people don't know about. It's called "telematics car insurance," also known as "usage-based insurance."

Telematics car insurance might not be top of mind for most drivers. If this is the first time you've heard of it, you're not alone. But after a year of big increases in car insurance premiums, many Americans are looking for cheaper car insurance. Telematics could be part of the solution to high prices, and all it takes is signing up with an insurance company and sharing some data via your smartphone.

Let's look at a few reasons why telematics car insurance could become a bigger topic of conversation for cost-conscious drivers in 2024.

Telematics car insurance: What is it?

With traditional car insurance policies, premium prices get calculated based on where you live, your driving history, the age, the make and model of your vehicle, and a few other factors beyond your control. If your state or city tends to have higher rates of car crashes, or if car repairs are especially expensive where you live, your car insurance premium will be more expensive.

As a driver, most of these factors that go into your insurance premium are beyond your control. Even if you're a safe driver who doesn't drive very often, you have to pay a fixed rate for insurance. Your insurance costs might be higher than your safe driving record deserves, based on the overall costs of fixing a car in the community where you live.

Telematics car insurance is a new way to protect your vehicle and personal finances. With telematics, you can get credit for your safe driving habits. You can prove to your insurance company that you deserve to pay lower prices for car insurance. Instead of getting lumped in with every other driver where you live, telematics can help you earn car insurance discounts as a lower-risk, lower-cost customer.

How telematics car insurance works

Telematics car insurance can help you save money in just a few simple steps:

1. You sign up with an insurance company for a special telematics insurance program. Several major insurers, like State Farm, Progressive, and Nationwide, offer these programs under different brand names.
2. Your insurer sends you a telematics tracking device to attach to your car (like a Bluetooth beacon on the windshield) and has you download a mobile app to pair with the device.
3. With your permission, your insurance company tracks a limited amount of data from your everyday driving routine -- such as how much you drive, what time of day or night you drive, how fast you accelerate and brake, and whether you are distracted by your phone while driving.
4. If your data shows that you're a safe driver, you can qualify for significant discounts on car insurance.

State Farm says that drivers can save up to 30% with its Drive Safe and Save™ telematics program, and the Nationwide SmartRide® program advertises savings of up to 40%. But be aware that there is no guarantee you'll get a discount from telematics. If your driving data shows you're doing risky things behind the wheel, you might have to pay a higher premium.

Why telematics car insurance could be a big trend in 2024

2023 was an expensive, frustrating year for many Americans, with high inflation causing many people to deplete their savings and struggle to pay bills. A big surge in car insurance prices was part of the inflation problem. The average cost of a car insurance policy increased by 17% during the first half of 2023, according to a survey from Insurify.

People are sick and tired of paying high premiums for car insurance. As more people look to find room in their monthly budgets in 2024, car insurance is an obvious place to find savings. Especially for younger drivers who are mobile-savvy and might feel more comfortable sharing data with the companies they do business with, telematics car insurance could become a new trend.

What if you could save 40% on car insurance by using telematics, like the best discounts offered by Nationwide's telematics program? According to our survey data, the national average car insurance premium costs $3,017 per year. A 40% discount of that amount equals $1,207 per year, or about $100 per month! Isn't it worth downloading one more mobile app to save $100 per month?

Bottom line: Some of the best cheap car insurance companies offer telematics as another way to help you save. All you have to do is agree to share some data with your insurance company via mobile technologies. Telematics could even provide you with helpful nudges and incentives to be a safer driver, follow the speed limit, and avoid car crashes in the first place. Americans already share so much personal data with companies -- why not share some driving data with your insurance company, and get more money in your bank account?