Faulty technology, not driving for a month and missing emails are just some of the reasons drivers have suddenly had their telematics-based auto insurance canceled, complaints show.
Many auto insurers use telematics software to monitor how drivers drive and set their premiums accordingly, offering a big discount for safe use of the road. This tracking relies on a “black box” installed in a car, the driver’s smartphone technology, or a combination of both.
These insurance deals are most common among young drivers, who may spend 10 percent of their salary on car insurance because insurers consider them riskier.
But many drivers have been caught off guard by the fine print, which can lead to policy cancellations seemingly out of nowhere.
Generation gap: Younger drivers are more likely to accept tracking telematics insurance deals in exchange for lower premiums that might otherwise be unaffordable
This has a disproportionate impact on young drivers as they must inform future insurers of the cancellation, which can further increase their premiums.
Drivers report that their telematics policies have been canceled due to seemingly minor reasons, such as not driving for 28 days, missing a warning email, turning off their phone’s Bluetooth, low phone battery, and telematics technology not working properly.
These cases are reflected in the 2024 decisions taken by the Financial Ombudsman Service (FOS) for unjustified cancellations, 35 of which were confirmed in favor of the consumer.
Why are telematics policies cancelled?
For example, insurer Advantage canceled motorist Miss T’s policy because her car had not recorded any trips for 28 days.
Advantage is an insurer owned by insurance broker Hastings and is used by Hastings Direct for its YouDrive telematics policy.
The 28-day clause is a common requirement of many telematics policies, as insurers would argue that long periods without receiving data could be a sign that a car is being driven without recording enabled, and also give no way to underwrite the risk. The cancellation notice period in many cases is only seven days.
However, in Miss T’s case, she was simply traveling abroad without her car, which remained stationary.
The cancellation came as a surprise, as Advantage had only relied on sending emails, which had gone to the spam folder unread.
He argued that he had been left without insurance, a “blemish on his character” and would now have to pay more for coverage. He also said he had to use public transportation to get around.
The FOS said Advantage had acted unfairly and should have tried harder to communicate before canceling the policy. The Ombudsman ordered the insurer to erase all records of the cancellation and pay £250 in compensation.
In a second example, also with Advantage, motorist Mr K canceled his car insurance contract because of the 28-day clause. Once again, he simply hadn’t driven his car much and the FOS took his side.
In another example, West Bay Insurance was found to have unfairly canceled a telematics policy due to “speeding” that was actually a technological error.
The insurer recorded the driver, Mr F, traveling at speeds of up to 115mph and breached his policy.
But these recordings may not be accurate.
Firstly, his car only had a 1 liter engine and was capable of reaching a maximum speed of 160 km/h according to the manufacturer. Secondly, Mr F’s car was also recorded making journeys of up to 37 miles at speeds below 10mph, an improbably low speed.
West Bay had acknowledged that it was incorrectly recording Mr F’s driving in February 2024, when it recorded him speeding at 138mph, but then canceled his policy in March anyway.
The FOS ordered West Bay to cancel Mr F’s outstanding fees, pay a partial refund, pay £250 in compensation and delete any record of the cancellation.
In another example, insurer Ageas rejected a claim on a telematics policy because it thought the driver, Mr A, was driving without his telematics black box connected.
This policy required Mr. A to install an app on his phone that would need to connect to a physical telematics box permanently installed in the vehicle.
The policy also required that your phone be charged with at least 10 percent battery on each trip and have Bluetooth enabled, both common features of many telematics insurance deals.
The Ombudsman decided that “on balance I am more convinced that there was a problem with the operation of the Ageas telematics device” and asked the insurer to pay the claim.
What insurers and brokers say
An Advantage spokesperson said: “If a customer does not comply with the policy terms, which are made clear throughout the purchasing and onboarding process, they may have their policy cancelled.”
‘One of the most common reasons customers cancel their service is for driving while using a mobile phone. We communicate with customers in many different ways (email, SMS and letter) to notify them and discuss any cancellations with them, however we recognize that in some of the cases confirmed by FOS, our communication could have been better.
“We are always looking to improve our customers’ experience, and some of our processes since these cases have been improved.”
An Ageas spokesperson said: ‘Ageas’ current telematics insurance offering is sold through intermediaries as we do not sell or service the devices included in a telematics policy. We are currently working with our broker partners to explore the issues raised here and ensure policyholders understand what they need to do to ensure their telematics policy is valid.’
A spokesperson for West Bay said: ‘West Bay Insurance takes customer service very seriously and we are always concerned when we hear that a customer has had a bad experience. We are investigating what has happened in this case because we want to ensure that the best service is provided to policyholders.’
Some links in this article may be affiliate links. If you click on them, we may earn a small commission. That helps us fund This Is Money and keep it free to use. We do not write articles to promote products. We do not allow any commercial relationship to affect our editorial independence.