Telematics tools are transforming the trucking and fleet management industries. Telematics allow companies to gather data about vehicle location, driver behavior, and real-time engine diagnostics, in turn potentially helping them to reduce their insurance premiums by minimizing risk and encouraging safer driving.
The uptake of telematics in the commercial auto industry took a while to shift out of first gear. Initially, many companies were concerned about the significant upfront cost of investing in telematics for entire fleets. Some also expressed concerns around data sharing and what gets reported to insurance companies, and there has always been push back from drivers who dislike the ‘Big Brother’ feeling of always being watched.
However, over the past few years, things have changed. Trucking companies and fleet operators have started to realize the benefits of telematics solutions and they now welcome the technology for its positive safety and operational impacts.
“It’s reached a point where almost all of our clients in the trucking business use some form of telematics,” said Bo Birtell, senior vice president, Brown & Brown Metro. “They’re embracing the technology for a number of reasons. Not only can telematics improve driver safety, but the technology also generates analytics and reports that help companies pinpoint opportunities for risk reduction.”
Those analytics reports can help insurance brokers and agents paint a more accurate picture of an insured’s risk profile to the insurance carriers, potentially helping to lower their insurance premiums. This is a significant value-add in the current hard market, where commercial auto insurers have raised rates and restricted coverage in reaction to years of deteriorating loss ratios.
Telematics also help to validate vehicle usage, which is important as more insurers start to write policies based on mileage. That became particularly useful during the COVID-19 pandemic, when some non-essential fleets were taken off the road and insureds were seeking credits for risk reduction. Telematics helped to validate insureds’ requests and enabled insurance carriers to provide bespoke solutions and support.
“The conversation in telematics has shifted towards the use of video technology,” Birtell told Insurance Business. “With artificial intelligence and the way that technology has progressed within the cameras, not only can trucking companies and fleet managers look backward at irregularities that have already happened, but they can get updates in real time.
“You can certainly do the same without a camera, but I would argue that telematics without video only really tells half of the story. Telematics solutions are typically triggered if there are irregularities in braking, speed, and other driving behaviors – and that can happen all the time. But with cameras, you can see exactly what was happening both inside and outside the vehicle at the point of irregularity. If there’s a collision or an incident on the road, the camera can tell the entire story, which can have a significant impact on the outcome of a claim.”
It can take some time for companies to see a reduction in their insurance premiums through the use of telematics. Some insurers will offer immediate discounts, but, at the moment, the offerings still “vary widely,” according to Birtell. But what Birtell has seen is that companies that embrace telematics with video often see a relatively immediate reduction in the frequency and severity of claims, which can be used over time as leverage to drive down the cost of risk.
“I think it’s important for brokers and agents to advocate for telematics, and especially the use of cameras, and for us to help our current clients and prospective clients to understand how the different functionalities of telematics are really a good return on investment,” Birtell added. “We’ve got to be able to look at the impact on claims for organizations that have implemented telematics and share that with our clients who might not be doing anything. And we’ve also got to work with our insurers around how telematics is going impact premiums [risk assessment, and claims management].
“We have a lot of real-life examples within our client base, where the telematics and cameras have prevented significant accidents. So, it’s really up to us to be advocates of telematics for our clients and potentially help them as they go through the selection of the system, and deciding how they’re going to use the data, and who’s going to have access to it. I believe it’s really important for brokers and agents to be a part of the process and the conversation around how our clients and prospects are going to implement telematics.”