Telematics is the collection and transmission of data from vehicles or equipment, such as location, speed, acceleration, braking, mileage and engine diagnostics, through GPS, sensors and mobile networks. In financial services it feeds usage-based motor insurance, fleet risk management and asset-backed lending, where price or credit limit depends on actual use. A black box, plug-in device, smartphone app or connected-car platform scores trips on harsh braking, speeding, night driving and phone handling. Since the Test-Achats judgment barred gender-based pricing in the EU from 21 December 2012, driving behaviour has become a lawful way to separate young drivers. The data is personal under GDPR, and the EU Data Act lets vehicle owners share it with insurers.
How does telematics insurance work
A data source sits in or near the vehicle: a "black box" fitted behind the dashboard, a plug-in device in the onboard diagnostics port, a smartphone app using the phone's sensors, or the car manufacturer's own connected-car platform. Trips are scored on events such as harsh braking, speeding against the posted limit, night-time driving and phone handling. The score feeds the underwriting model at renewal or adjusts the premium monthly.
A worked example: a 19-year-old is quoted £2,400 a year on a standard policy. A telematics policy starts at £1,900 with a monthly adjustment band; after six months of scores in the top quartile the premium falls to about £1,600, while frequent late-night driving or speeding pushes it up or triggers a curfew warning. The figures are illustrative, but the mechanism is the core of risk-based pricing in motor insurance.
Why telematics grew in Europe
Since 21 December 2012, following the Test-Achats judgment of the Court of Justice, EU insurers cannot use gender as a pricing factor. Driving behaviour became one of the few lawful ways to separate low-risk from high-risk young drivers. Telematics lets an insurer price a 19-year-old woman and a 19-year-old man differently only through how each actually drives, which is lawful, rather than through gender, which is not.
Telematics data privacy and the EU Data Act
Driving data is personal data under the GDPR, and location data receives particular scrutiny. The EDPB's Guidelines 01/2020 on connected vehicles treat the car as terminal equipment, so accessing data stored in it generally needs consent under the ePrivacy Directive, and they recommend that insurers receive a computed score rather than raw trip data. Processing location outside the vehicle is likely to require a data protection impact assessment.
The EU Data Act, applicable since 12 September 2025, gives vehicle owners and lessees the right to access the data their car generates and to share it with a third party of their choice, such as an insurer. Access is free of charge for the user, and the data holder must share on fair and transparent terms. Products placed on the market from 12 September 2026 must be designed to make that data directly accessible. This weakens manufacturers' control of vehicle data and lets insurtech firms price from OEM data without fitting hardware.
What buyers check
In an insurtech acquisition, the value of a telematics book depends on loss ratios by score band, the consent basis for every data stream, and contracts with device or OEM data providers that may not survive a change of control.
See also: InsurTech.