Telematics: Not Just for Personal Anymore

More insurers relying on data-gathering tools in the commercial-fleet, trucking industries

While the use of telematics-based insurance to date has primarily been seen in monitoring personal-vehicle use, insurers are increasingly relying on the underwriting tool in the commercial-fleet and trucking industries.

“If I’m doing a risk assessment for an insurance company, a lot of underwriters are looking for some kind of refined [global positioning system],” says Beth Lowrey, senior associate for Mercury Associates Inc.—a Washington D.C.-based management consulting firm for large fleets.

Insurance players on the commercial  side are adopting programs to tap into the wealth of knowledge a telematics system can deliver—and initial data looks very promising for loss ratios, sources say.

“We’ve seen very good improvement in frequency and severity,” says Scott Stevens, vice president of captive and specialty programs at The Hartford, which launched its FleetAhead program more than two years ago.

Through a partnership with a telematics service provider (all insurers in this space partner with a provider instead of developing its own device, as in the personal auto insurance market), he adds, the Hartford’s loss-control staff can work with clients to improve loss costs and exposures.

Other insurers are in the process of doing the same. “We are there to work with management in order to tune their ability to improve driver performance,” says Chris Hayes, risk-control director of transportation services from Travelers, which early this year began IntelliDrive Fleet Safety Solutions for commercial lines.

Travelers partners with several telematics providers. The insurer works with customers to help them use the telematics data they receive from their chosen providers. “We do not have any data feed,” explains Beth Tirone, Travelers’ senior director for commercial auto product development. “This is strictly providing services from a risk-control perspective.”

Liberty Mutual, too, is finding value in telematics. The carrier unveiled its Onboard Advisor loss-prevention and risk-management services exclusively through Liberty Mutual Agency Corporation regional companies in 2010 to small and medium-sized fleets. The insurer uses statistics from its approved telematics partners to create a score used for pricing at the time of renewal.

Onboard Advisor Program Manager Chris Carver says Liberty Mutual in the past six months has been contacted by several telematics providers wishing to partner up.

“The industry is growing fast,” he says. “It’s a great opportunity for businesses that are now starting to grow [after the economic downturn]. Owners can stay in control of their fleet and control costs.”

After all, telematics is not a one-way street of benefits to the insurer. The insured can improve safety, fuel use, customer satisfaction and prevent or limit losses from theft.

There is enough data—or at least sufficient anecdotal evidence—to support the technology investment, which is decreasing as competition increases. Systems can also be leased.

“If you use it and use it right, [you’ll benefit],” Lowrey says. “You’ll see it in your bottom line. And you’ll see it in your insurance premiums.”

The applications are numerous. Fleet owners acting as their own risk managers can track drivers’ locations, monitor a driver’s habits like hard-braking and accelerating, and reduce fuel consumption by looking at the data to notice trends such as the impact of idling, or the use of one route versus another. Carver says owners can cut down on “unnecessary wear-and-tear on their fleet.”

Owners have also reported a reduction in brake-pads costs, Stevens adds, because programs centered on telematics “create better, more safety-conscious drivers.”

The value for insurers extends beyond potential reductions in loss-cost trends and narrowing poor risks. Telematics may also help preserve the exposure base. By cutting down on costs for its insureds, businesses can remain profitable.

For the insurer, information can be provided by some systems to give a much more accurate view of an accident. Was the traffic light green or red? How fast was the driver going?

Insurers say information yielded from telematics systems can also help cut down on fraud. Using data on such critical factors as speed, claims professionals can determine whether an alleged injury was in fact possible.

The industry appears to have assuaged the fear of Big Brother. Owners and operators are taking to the idea, and insurers with telematics-based programs are sticking by buyers’ sides to assist in rolling out systems and fostering an environment of constant improvement rather than conveying a dark cloud of constant criticism. 

“This doesn’t work if management isn’t fully engaged,” says Hayes. “We’re looking to foster owners as coaches while we get them comfortable with the idea and our involvement.”

Lowrey, who also owns a risk-management and consulting service for small and medium fleets, says drivers’ unions have voiced concerns as telematics gain popularity, but the fact is, “Owners are looking at performance anyway,” implying that drivers would still be watched closely regardless of the new technology.

Fleet owners typically pitch the idea to drivers by focusing on safety and job security.

“’If you get hijacked, we want to know—we want to know where to look for you,’” Lowrey says owners will say to drivers. “But the majority of drivers have been around and they don’t worry about it, so long as it doesn’t seem like you’re nitpicking them to death.” 

Industry-wide, telematics usage remains in its infancy. Solid favorable loss-cost trends for the industry may not be readily available and use may be limited to big insurance brands but, according to a report by research and consulting firm Celent, telematics use is growing and “not going away any time soon.”  

Critics also say telematics could “cannibalize” books of business, based on the idea that policies could be written at lower premiums based on more hard data. Yet that same data would also help better calculate risks, Celent adds, noting it “would be better to cannibalize one’s own book than watch someone else do it.”    

Comments

Resource Center

View All »

Guide: 5 Steps to Selling Cyber

Cyber risk and data security is on the agenda of every business owner and executive....

Citation Correlation

Do rigger and signalperson qualifications correlate with the cause of crane and rigging accidents? ...

Complete Guide to Electronic Signatures in Property & Casualty Insurance...

In property and casualty insurance, closing new business quickly is key. Learn how to leverage...

INSTANT ACCESS: Complimentary Sales Closer Questionnaires

Help property owners or managers compare your commercial residential property insurance coverage vs. the competition....

Determining Vacant Property Perils and Valuations

Are your clients fully covered for Vacant Properties? In this economic climate, your insureds may...

Risk Management for Law Firms

This package of 3 concise risk management articles offers straightforward content and practical suggestions law...

Guide: Top 15 E&O Risks-And How To Avoid Them

Accidents happen. But when it's an errors and omissions oversight, that accident can open your...

We'll Show You How to Reach Your Sales Goals

Whether you work alone or have a team of agents working for you, we can...

Get The Most From Your Book Of Business

Turn your existing book into an exclusive program or roll your book. Learn about the...

Who Pays When There’s a Pollution Claim on an Auto...

The Pollution Liability - Broadened Coverage of Covered Auto (CA 99 48 03 06) endorsement...

Florida Insurance Monitor eNewsletter

Receive P&C insurance news and perspective on the market and regulations for Florida and the Southeast Region. Sign Up Now!

Advertisement. Closing in 15 seconds.