A Beginner’s Guide to Telematics: What You Need To Know

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5 September 2023

A Beginner’s Guide to Telematics: What You Need To Know

Telematics is a hybrid of two fields of study, telecommunications and informatics. It originated with the U.S. government when it investigated Global Positioning System (GPS) to track the U.S. military assets. It's now used in fleet management, insurance and asset tracking. McKinsey recently estimated that the telematics industry could reach as high as $750 billion by 2030, mainly fuelled by its adoption for fleet management and increased interest from vehicle insurers.

Telematics Defined

By definition, telematics leverages GPS, the internet, and machine-to-machine communication, as well as connections to cloud-based services. Primarily used with vehicles, it incorporates various technologies, including wireless communication, integrated cell-phone devices and automatic driving assistance systems. However, telematics relies on two particular technologies to gather and deliver critical data: GPS navigation and onboard diagnostics (OBD).

How Telematics Works

GPS transmits the vehicle's location via the telematics device. This location, along with other data gathered by the OBD system on the car, is then transferred from the vehicle via the internet and a wireless cellular connection provided by a telecommunications company. This secure data is then made available to drivers and others, such as insurance companies or fleet managers, and is viewable via a smartphone or web browser.

Your Options for Telematics

There is a wide range of options for adding telematics to your vehicles. These include do it yourself add-on devices and more complex, professionally installed systems. Many of these come with a smartphone app that allows you to quickly connect to the data and services provided by the telematics system. Vehicle manufacturers, including those in the trucking industry, are beginning to offer built-in telematics devices. Some insurance companies are also offering these as a bundle when you purchase insurance. Finally, companies can connect telematics networks to manage their entire fleet.

There are several key types of telematics.

  • A smartphone app can function as both a sensor and transmitter, and these are probably the easiest to install. Data quality, however, can be limited.
  • Cigarette lighter devices are external telematics systems that plug into a car's lighter plug. Again, they are easy to install, but data may be limited.
  • Smart tags mount on a dashboard and collect and transmit data via a SIM card. They are relatively easy to install, and data is harvested from the device via a smartphone app or a web page.
  • An OBD device plugs directly into the car's diagnostic port and must be professionally installed.
  • Battery line devices are connected directly to the car's battery and transmit data via a SIM card. These too must be professionally installed.

Driver Enhancement

Telematics can help you drive better by providing immediate feedback on poor driving behaviors, including excessive braking and rapid acceleration. It will also alert you to dangerous road conditions, including weather hazards, accidents or construction.

Telematics is what allows parents to set speed limits and even route limits for their teenage drivers. It can also include driving enhancements designed to enhance driver reaction times, which are found in many new vehicles as handy features. These can consist of lane-change monitoring, rearview cameras and autonomous braking that quickly detects and reacts when an obstacle crosses your path.

Fleet Management and Telematics

Fleet management relies on telematics in multiple ways. For example, recent legislation is encouraging telematics for electronic logging requirements in the trucking industry. It also allows fleet managers to track their vehicles, map out safe routes and receive immediate information and data on driver behaviors and truck maintenance.

Car Insurance and Telematics

Introduced by a single car insurance provider in Canada in 2013, telematics or usage-based insurance (UBI) is gaining some interest in Canada. The idea is that telematics integrated into your car's systems log usage, including mileage, speed and idling. It monitors critical risk factors, including the distance you drive, time of day you are on the road and your acceleration and braking habits or braking distance.

The better your driving habits, the more you can save on insurance. Insured car owners pay only when they use their car at a rate tied directly to how they use the vehicle. This system rewards good drivers and penalizes poor driving behaviors. Although this seems like a good thing, it could also explain its slow rate of adoption. Although up to 20% of U.S. car owners currently use telematics-based insurance, only 4% of Canadians have embraced the concept.

Convenience and Cost Savings

Location services provided by telematics can help you find your car in a parking lot, but they could also help police locate and recover your vehicle if it's stolen. Car share companies rely on telematics location capabilities to tell clients where their rides are and when they'll arrive and help their drivers locate customers. Telematics-enabled software can also help track member usage for pay as you drive rental and car share club arrangements.

Telematics can quickly inform you when your car requires maintenance or when issues with your vehicle may be putting you and your passengers at risk. Drivers no longer need to guess or try to remember when they last had their car serviced. It can also help boost fuel economy by identifying idling time, speeding and rapid acceleration, all of which contribute to wasted fuel.

If you've ever locked yourself out of your car, you'll appreciate the ability of telematics systems to unlock your vehicle safely. In an emergency, telematics systems can notify emergency services and provide directions to take emergency personnel straight to you and your vehicle. It will also track unauthorized usage for you.

The Takeaway

Telematics offers opportunities to save money while also making our roads and highways much safer. Whether you are an individual driver, a fleet manager, a fleet driver, or an employee who needs to drive frequently for work purposes, this burgeoning area is one to explore.