Carrot or stick: which makes you a better driver?
Carrot Insurance is offering new and young drivers regular cashback to encourage good driving. But are we better off with punishment to kick out bad habits?
You’ve probably already heard of the big names in the telematics insurance business like Insure the Box, InGenie, Autosaint and the AA.
But now there is a new company on the scene called Carrot that claims it is taking a fresh approach to ‘pay as you drive' black box insurance.
Carrot thinks it can encourage good driving habits via cashback incentives and promises it won’t penalise bad driving during the policy.
As the name suggests, Carrot is based on rewards. But are we better off with the stick?
How it works
Every journey you make is monitored by bespoke black box technology and each trip is given a score ranging from -10 to 10.
Good driving is judged on smoothness (braking, accelerating, taking corners), speed (legal and environmental) and usage (it’s harder to earn points driving at night between 11pm and 5am but breaks on long journeys will boost scores).
Like other telematics insurers you get a limited mileage policy with the chance to top up later. Carrot offers a choice of 3,000 or 7,000 miles.
So far, so normal. Let’s take a look at what makes Carrot different.
Good driving amasses cashback of up to 15% of the premium initially paid.
On an average £1,600 policy that works out at £240 in a year. Your reward is built up and released quarterly and goes straight onto a prepaid MasterCard, called the Carrot Card, which you can use practically anywhere.
The reward structure draws money from the premium already paid on the policy and pays it directly to the driver. So if you haven’t paid for your insurance yourself (as might be the case with most teens) it's a good way to earn a bit of extra money.
On top of this you can get up to 6% cashback on the Carrot Card when you make purchases at over 20 selected retailers such as Topshop and Debenhams.
Unlike other prepaid cards you don’t incur any charges unless you load it with your own money and you can withdraw what you earn if you need the cash instead.
As well as quarterly payouts to look forward to, potential cashback and referral payments, you can also monitor exactly how much your renewal discount will be via your dashboard.
With perfect driving the discount is up to a third off the renewal price.
Add that to the automatic discount from the no claims you would have been able to gain from your good driving, and you can start to see a significant saving.
Is Carrot really different?
Carrot claims it doesn’t penalise poor driving.
The cashback you earn doesn’t drop away if you start driving badly and you will never have to pay any additional money during your policy as long as the details of the policy remain the same (i.e. address).
The only way you might notice you’ve done something bad is your cashback doesn’t grow, your renewal discount gets lower or the cost of buying extra top up miles goes up.
Other telematics insurers like Insure the Box tend to incentivise good driving with the promise of lower premiums at renewal, but there are no in-between treats as an encouragement.
Autosaint offers a low premium at the outset and a choice of curfew or non-curfew policies are available. But should you need to drive at night on a curfew policy you will be fined. Also, if your driving is below standard each quarter your premium will go up.
The closest match is perhaps InGenie which offers drivers the opportunity to receive a refund when the policy is reviewed every three months. However, like Autosaint your premium can also go up.
Carrot or stick?
Last year I was invited to put telematics technology to the test. I did pretty well and was able to prove I was a good driver despite all the statistical analysis stacked against me.
I carried out the test with Autosaint, a company which penalises any poor driving by increasing the premium each quarter.
This was a deterrent in the back of my mind, but I have to admit the thought of making money is a much more powerful motivation than the thought of losing it. So Carrot could be the sort of insurance that would work for me.
But what do you think? Are Carrot’s cash incentives enough to encourage better driving or will new and young drivers only learn through penalties?