Telematics is the technology that records and transmits data about how a vehicle is driven, using a fitted device or a smartphone app. Insurers use it to measure real driving behaviour such as speed, braking, mileage and time of day.
In one line: Telematics is the technology that records driving data for use in motor insurance pricing.
How telematics works
A telematics device or app captures detailed driving data and sends it to the insurer. That information feeds a driving score, which can raise or lower the premium based on how safely and how much the car is actually driven.
A driver scoring well over six months on a telematics policy might see a renewal fall from 1,800 GBP to 1,400 GBP, whereas repeated speeding and heavy braking could increase the price or trigger warnings under the policy.
Telematics data can also help locate a stolen vehicle and establish facts after a collision, such as speed and time.
Telematics vs a black box policy
Telematics is the underlying measurement technology. A black box policy is the insurance product built on it, where the recorded data directly shapes the premium and any conditions such as mileage limits.
Not all telematics uses a physical box, because app-based monitoring records similar data through the phone's sensors.
Primary source: FCA: Insurance