How to make insurance telematics work in the fleet space

How to make insurance telematics work in the fleet space

In its early years, insurance telematics has focused primarily on the consumer space.

Telematics companies provide solutions that monitor usage and harsh driving, and insurance companies use those solutions to better gauge the risk of everyday drivers.

But as fleets start to adopt management solutions that focus on safety and driver behavior, insurers are starting to see the value of harnessing telematics to better manage risk in the commercial space.

“Traditionally, fleets have used fleet management for operational efficiency—to provide visibility, two-way messaging, work flow, navigation, and so on,” says Bill Karnazes, managing director for Qualcomm Enterprise Services Europe.

“Now, we’re starting to see interest in this add-on feature with a specific focus on safety. Fleets are interested, as are insurers.”

Indeed, if properly oriented, telematics devices can provide an obvious win-win: Fleets get better operational efficiency and safer drivers, while insurers get a safer fleet to insure and a comprehensive breakdown of each vehicle.

Telematics companies and insurers have already forged partnerships and unveiled joint solutions on this front.

Just last month, Zurich, one of the largest fleet insurers in the world, introduced an integrated fleet risk management program called Zurich Fleet Intelligence that embraces a number of leading telematics solutions.

“When you start to marry telematics solutions with safety, risk management, and your overall profile with your insurance company, the whole puzzle starts to fit together and make total sense,” says Bob Tschippert, head of Zurich’s Global Automotive Industry in the Americas.

Safety first

Several factors make the current fleet environment ripe for safety solutions that benefit fleets and insurers.

For one, legislators are cracking down on driver behavior.

Last year, the US Federal Motor Carrier Safety Administration (FMCSA) introduced a new regulatory scheme called the Comprehensive Safety Analysis 2010, which requires commercial drivers to have a driver safety score.

Companies can access these scores in a data preview, assess where their drivers are failing, and identify ways to address safety problems before they get fined for them.

Such legislation naturally leads companies toward telematics solutions that proactively monitor driver behavior.

A number of studies, including one from the FMCSA, “show significant safety benefits and a reduction in a variety of at-risk driver behaviors when fleets use in-vehicle monitoring devices,” says Jim Breitkreitz, head of Corporate Client Risk Engineering Services at Zurich Services Corporation.

Another factor is the increasing capabilities of telematics solutions.

Ten years ago, telematics devices could draw a flurry of statistics out of a truck, but that didn’t always translate into valuable insights.

“There was so much information coming out of those devices that it was literally like trying to drink water out of a fire hose,” says Tschippert.

Now, telematics solutions have advanced to a point where they can pinpoint inefficiencies and illuminate driving behavior, a more valuable proposition for insurers in the fleet space.

Finally, as gas costs continue to rise and the cost of telematics solutions falls, interest in these solutions will continue to grow.

“The cost benefit lines are crossing,” says Breitkreitz.

“That’s one of the big drivers behind this current wave of interest in telematics.”

The pipeline approach

Telematics companies can approach the fleet insurance opportunity from two directions.

The first is to approach existing customers in the fleet space with new value-added services that promise better driving behavior in real time and better insurance premiums on the back end.

“The advantage here is that we already have a large install base on the commercial side,” says Karnazes.

“That has translated into a very strong pipeline to offer this safety solution.”
Qualcomm is in the process of customizing its Pay-As-You-Drive and Pay-How-You-Drive solutions for fleets.

The new customized solutions will include driver feedback units and Web services for coaching and real-time training.

The company is still focused on the consumer market and expects to see steady growth on this front in the future, especially in Europe where the promise of eCall—and industry-wide embedded devices—is on the horizon.

But the commercial space is a more immediate opportunity, as fleets are responsive to technology that makes their drivers safer and premiums lower.

“We saw very quickly that with a lot of initiatives coming from a legislative perspective on driver safety, and with our ability to collect data and improve driver behavior and safety, commercial fleets will be a quicker way for us to be more successful in the market,” Karnazes says.

The insurance approach

The second approach for telematics companies is to take their solutions directly to insurers.

Insurers in the fleet space like to offer customers value-added services that improve driving behavior and reduce risk.

Many fleets are self-insured or entertain the thought, so companies in the fleet insurance business want to solidify their customer base and expand it.

Telematics solutions can help, and Zurich Fleet Intelligence is case in point.

The program works by combining Zurich’s risk management and driver training services with industry-leading telematics solutions to help organizations manage risks and increase fleet driver safety.

As fleets demonstrate better driving behavior, they can influence future premiums.

Zurich has already partnered with DriveCam, GreenRoad, IVOX, SmartDrive, and Trimble.

“This approach is proactive for the very first time,” says Tschippert.

“As opposed to looking at someone’s motor vehicle report and saying they have X number of points, or waiting until they have an accident and responding after that, this is a proactive approach to an accident before it happens.”

Tschippert and Breitkreitz stress that, from the insurance industry’s perspective, it’s not just about putting a box into a vehicle and culling data.

It has to be an integrated solution that uses driver training and support to change behavior.

“The reason more insurance companies haven’t gotten involved with telematics is that you get mixed results if all you do is put the black box in the vehicle and expect to solve the problem,” says Breitkreitz. “It’s not a silver bullet.

“Zurich has risk engineering resources to provide the support that companies need to make sure a cultural shift happens. That way you can effect permanent change in driving behavior.”

Andrew Tolve is a regular contributor to TU.

For all the latest on insurance telematics, join the industry’s key players at Insurance Telematics Europe 2011 on May 4 and 5 in London.

 


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