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Can Insurance Companies Reduce Car Accident Rates?

In spite of all the technological advancements of the 21st century the rate of serious car accidents is not on the decline. There are still hundreds of thousands of people killed or seriously injured on the roads of the world each and every year with no decline in sight. However, there might be something that car insurance companies can do about it if they are so inclined.

The theory is that there is not enough incentive for people to drive sensibly and safely and thus they drive in such a way as to reach their destination quickly rather than safely. This is not helped by the fact that there are now so many systems in place in upper market cars to prevent car accidents that people seem to be more lackadaisical about how they drive, they rely on the car to avoid a potential accident instead of avoiding putting themselves in a position for preventing a car accident.

The incentive that some car insurance companies have put in place involves the actual premiums of their clients. Tracking devices that record driving habits are installed in client cars and feedback is given to the insurance companies. The principle behind this is called Telematics and in South Africa this is implemented primarily by the insurance company Pay As You Drive. Drivers who are seen to drive safely are rewarded with lower premiums than those who are seen to drive recklessly. It is hoped that this kind of incentive will make drivers more inclined to drive carefully as failure to do so will impact them financially.

It remains to be seen if this kind of tactic is going to have any actual effect on the driving habits and accident rates of clients of insurance companies that have implemented this system. The theory is a sound one however and should have an impact.

Here is a video that explains what Telematics is:

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