Your insurance provider may soon be asking for access to your telematics data. What’s in it for you?
By: James Menzies of “Truck News” 2012-08-20
Insurance brokers and providers may soon be asking fleets for access to their
telematics data, in an effort to provide more accurate insurance pricing and to help fleets better utilize that data.
It’s a bold new approach that’s already happening in other parts of
the world, including Europe and Australia. Here in Canada, Industrial
Alliance made waves earlier this year, when it launched a program in
Quebec that allowed young drivers to install data recorders in their car
and then pay premiums based on their specific driving habits.
Truck News has learned that the concept – sometimes referred to as
Pay How You Drive or Pay As You Drive – will soon be rolled out to the
Canadian trucking industry. Insurers realize
telematics
provides the basis for a more accurate means of underwriting risk.
Today, brokers and insurers collect the same old data (such as CVOR and
CSA scores as well as a five-year claims history) to determine premiums.
But insurers have come to realize that basing premiums on past claims
isn’t the best way to do things. For starters, it doesn’t address those
fleets that employ risky drivers but have avoided accidents through
sheer luck.
Using
telematics,
insurance providers will be able to identify risky driving behavior
that will most likely result in accident over time and can push a fleet
to intervene with offending drivers and address unsafe behavior before
that accident occurs. Insurers who tap into their customers’
telematics
data will be looking for information on speed, hard braking, abrupt
lane changes and rapid acceleration, among other risky behaviors.
“From an underwriting standpoint, it flips the underwriting model on
its head,” Scott Cober, vice-president, national leader with Marsh
Canada’s trucking practice told Truck News in an interview. “It becomes
more of a predictive underwriting model.”
At the very least, using
telematics
to determine insurance pricing will allow insurers to charge premiums
that better reflect a fleet’s likelihood of being involved in a crash.
But ideally, insurance providers will use that valuable information to
alert a fleet to worrisome trends and encourage interventions before
such accidents even occur.
“Fleet insurance underwriters currently review driver abstracts for
tickets and look at accidents to assess a high-risk driver in the
fleet,” Cober explained. “A fleet’s risky drivers may not be the ones
with tickets or accidents, but those who are trending towards bad
behaviors on the road – making unsafe lane changes, cornering at high
speeds, etc. These drivers are potentially your future accidents and
claims. The driver behavior data (collected through telematics) will
help safety managers prevent accidents before they happen.”
In most cases, insurers will be able to tap into data collected by existing and widely used
telematics
systems. Other programs may encourage fleets to invest in specific
real-time monitoring and coaching systems such as those that alert
drivers to risky behaviors in the cab as they occur, while also sending
reports to the fleet manager. Some “Live View” systems feature an in-cab
camera that captures video of what transpired in the moments
immediately before and after a risky maneuver occurred. In-cab camera
technology provides insurers with a useful tool when trying to
reconstruct an accident or determine who was at fault.
“We’re using that not only as a behavioral tool, but as a claims
tool,” Cober said. “For the first time, we’re gaining insight into what
happened and we’re seeing drivers become exonerated from the claim. I
think video is going to have a fundamental change on the whole claims
process. A fleet can say ‘My driver wasn’t at fault, he was cut off by
this driver,’ and on the reverse side, he may know the driver was at
fault right away and from the insurance standpoint we can set the
reserve up and get ready to pay the claim.”
Some fleets, naturally, will be reluctant to share their
telematics
data with their insurer. But insurance companies insist fleets have
plenty to gain by doing so. This applies both to safe fleets (because
they’ll pay premiums that better reflect the skills of their driving
force) as well as unsafe fleets (because their insurer will work with
them to identify unsafe practices and provide corrective training
measures proactively).
“The safest fleets are already being very proactive and are more
advanced than the other fleets,” Cober said. “But if you have claims,
there’s an issue with your drivers on the road. Fleets that want to
improve and become more efficient will turn to technology. To be
competitive in this marketplace going forward, those fleets are going to
have to do this.”
It’s likely that such programs will be voluntarily, at least
initially. But don’t rule out the possibility of an insurance provider
requiring the use of telematics for fleets with frequent claims.
“I can see possibly in the future, if a fleet cannot control its
claims, that an insurer will say ‘We will insure you, but you need to
put these measures in’,” Cober predicted. “I can see insurers using that
as an underwriting tool.”
Zurich’s Magi says fleets she has spoken to about sharing their
telematics data have so far been receptive, though she is quick to point
out Zurich insures mostly large fleets with high US exposure, and the
majority of those carriers already employ and understand the benefits of
collecting and analyzing telematics data.
“I have never had a customer say ‘I’m not giving you the data you
need’,” Magi said. “If anything, they’re asking ‘How can you help me
analyze this information so I can utilize it better?’ What telematics
does is it gives you a granular view of what’s happening with each
particular driver and vehicle on a daily basis. You’re going to see a
picture there. Insurers are going to see there is something there and
it’s to the customer’s benefit to be able to speak with an educated risk
services representative who’s going to be able to dig deeper and find
out where the big issues are.”
Eventually, insurance providers may look to provide insight into the
operational side of a fleet’s business, in ways that extend beyond
managing driver behavior. As an example, Magi foresees an opportunity to
assist with route planning. Insurers may look at a carrier’s lanes and
then suggest a route that avoids litigious states or areas where there
are weather-related risks at certain times of the year. Carriers would
then be faced with the decision of taking the most direct route and
possibly paying a higher premium, or a safer route that will provide
insurance savings. All this while meeting the demands of the shipper,
which in many cases will be looking for the most expedient delivery of
its goods.
“Ideally in the future the technology will get to a point where you
look at ‘What is the safest route to get to a point?’ and there’s a
charge for that,” Magi said. “If you (as an insurance company) have a
true partnership with a customer, you’re going to sit down together and
talk about this from a pure business perspective. What is the
cost-benefit analysis for your operation to take this particular route
versus the potential loss if you take a different route? It factors into
their deductible. There are going to be customers that are going to be
absolutely operations-minded and some customers will look at route
utilization with a holistic approach as to how it’s going to affect
their insurance.”
Magi noted insurance, in many cases, is a carrier’s third largest
expense and so she expects fleets will be willing to alter their routes
to lower costs.
Proponents of insurance
telematics insist the data that’s collected and shared will always belong to the carrier.
“This isn’t about Zurich going in and mining information from the
customers,” Magi stressed. “The customers can share this information
with us if they choose to. Ideally, the purpose of what we’re trying to
do is to show them how to better utilize that particular data.”
There are privacy issues, as well, to consider. Cober noted Canada’s
stringent privacy laws mean insurers won’t be drilling down to assess
drivers on an individual basis, but will be looking at a company’s
fleet-wide performance.
“Because of the privacy laws, we are saying to trucking companies
“You supply the data to your insurer in a condensed manner without
giving driver names, without giving vehicle numbers, just give a
holistic view of how the fleet is doing,’ and we’ll take that monthly or
quarterly and what we want to see is continuous improvement,” he
explained. “Canada has some pretty tough privacy rules.”
While fleet managers may see the benefit in participating in a
telematics-based Pay
How You Drive-type system, drivers themselves may be more resistant.
Cober insisted the systems endorsed by insurers will be sophisticated
enough to account for false alerts caused by other motorists.
“We know things happen on the road and it’s going to be quite common
to have errors because of third-parties cutting in front (of the
truck),” Cober said. He suggested fleets employing driver behavior
monitoring use it to reward the best drivers rather than installing the
systems for strictly punitive or corrective reasons.
“If it’s seen as a penalty or Big Brother, I think the safety culture
of the company won’t flourish,” he noted. “It needs to be promoted as
positive reinforcement for the drivers and to reward drivers for good
behavior.”
Regardless of how drivers and fleet owners feel about sharing
telematics data with their insurer, it seems inevitable. Canada is late
to the party, but globally the auto insurance industry is already moving
in this direction.
An Oliver Wyman Financial Services report, titled Uneven Road Ahead:
Telematics Poised to Reshape Auto Industry, concluded: “As technology
costs fall, privacy concerns recede and regulations become more
supportive, telematics is fast moving into the mainstream and will
fundamentally disrupt the auto insurance business. The threat to late
adopters is real: better drivers will enroll in telematics programs,
leaving behind a shrinking pool of poorer risks to the traditional
insurers.”
The same could be said for trucking companies.
Cober noted that by 2017, it’s expected that new vehicles
manufactured in North America will come equipped with some form of
telematics hardware already installed, “making the insurance telematics
process easier for consumers who may be confused on what actual hardware
is required in their vehicle.”
Another objection likely to be faced by insurers is the cost of
implementing the necessary technology, particularly for smaller fleets
that don’t already employ some form of telematics. But Cober said the
cost of the technology is rapidly dropping and the potential savings
extend beyond lower insurance costs, delivering a quick payback.
“Traditionally, only the big fleets could afford the technology. But
because the technology costs have been dropping, we’re beginning to see
the middle market fleets – the fleets with 10-50 power units – can now
afford this technology and can see the return on investment,” he said.
Because
telematics
can improve driver behavior and address bad habits like rapid
acceleration and hard braking as well as speeding, Cober said many
fleets are realizing fuel savings of 5-10% when employing a telematics
system that monitors driver behavior.
“We’re seeing fleets that in the first three to six months, are seeing their investment returned,” Cober said.
And for fleets that proactively monitor and address poor driving
habits, the insurance savings will also be tangible, he noted. While
premium reductions are generally a reward for lower claims costs
achieved over a period of time, Cober said it’s possible insurers will
provide some up-front savings for fleets that enroll in a telematics
program.
And when fleets discover the additional savings that are achievable
by analyzing their telematics data with some help from their insurance
provider, Magi said the idea will become an easier sell.
“At the end of the day, really, they’re truckers,” she said. “They
want to be able to move freight and run their business. They’re not
actuaries that deal with statistics. If we can provide them with the
tools and solutions that make it easier for them to very quickly analyze
(data) and see a problem, we’ve done them a huge benefit but we’ve also
done our bottom line a benefit as well.”
- The above feature article appears in the September issues of Truck News and Truck West
Re-posted by Vincent Rush of VP of Business Development for Lynx Telematics.
Lynx Telematics
is a Cincinnati based OEM of Telematic technology and provider of the
Geo Tab product along with patented “Anti Texting and Web Browsing”
technology for fleet based companies.
Lynx Telematics
is also the innovator and pioneer of the Lynx Safe Teen Driving Monitor
that grants parents real-time data on their teenagers driving habits
while blocking and disabling texting and driving.
For more information, contact Vincent Rush at (513) 965-6318 or by email at vrush@lynxtelematics.com
