Telematics an untapped resource for commercial auto insureds, experts say
Advisen
Telematics an untapped resource for commercial auto insureds, experts say
By Alex Zank, Advisen
Commercial auto underwriters increasingly expect their insureds to have telematics programs and use them to mitigate losses and manage risk, though many fleet owners may not take full advantage of the wealth of data they collect, industry experts told Advisen.
Telematics systems are perhaps more often associated with personal lines. The technology tracks the driving habits of insureds, offering safer drivers discounts or lower rates.
Most commercial fleets have some sort of telematics system in place, though they may only use it for logging mileage, according to Gregory Jacobs, Verisk’s director of product management for IoT/telematics.
“There are different degrees of how much they’re able to use it and leverage that data to help improve their driving behavior and the safety of their fleets,” Jacobs told Advisen. “Some are actively using it, and some are using it to comply with the regulations and not really going too much above and beyond that. The insurance industry is starting to try to get access to that data.”
Most underwriters now expect certain accounts, including trucking companies, last-mile delivery firms, and waste haulers, to have some sort of telematics program in place “or they’re not even going to talk to the client,” said Mike Vitulli, national casualty practice leader with Risk Strategies. That expectation may eventually extend to any client using commercial vehicles, from electricians to laundry services, he added.
Zurich North America considers telematics in its underwriting process and, more specifically, to what extent fleets use the data they gather, according to Diana Johnson, Zurich’s large casualty technical director. Some fleets may use telematics solely for routing and fuel consumption, while others also use it to monitor safety criteria like speed and hard braking.
“As more commercial fleets adopt telematics technology, this data will be utilized to distinguish between best-in-class risks and those that are average or below average,” Johnson said in an email to Advisen. “Telematics can also help mitigate claims. For drivers who are not at fault, telematics can help bolster their defense.”
Johnson pointed to social inflation, or the increase in claims due to larger settlements and jury verdicts, as the primary driver of growing claims severity.
“These large verdicts don’t just affect insurers. They threaten the existence of businesses and ultimately impact what the consumer pays for goods and services,” Johnson said.
Telematics can be a double-edged sword for commercial insureds, brokers told Advisen. They offer useful data in training and can show a driver was not at fault in a collision. Conversely, telematics can prove liability in an incident.
“Social inflation is leading to the use of the technology for the insureds,” said Christopher Denman, managing director of transportation at Hylant. “Unfortunately, right now, especially for motor carriers, they are guilty before being proven innocent. And if we can prove by technology what is taking place, it might not eliminate a claim, but it could reduce the dollar amount of a claim.”
It’s up to fleet owners to ensure they’re using their telematics programs to better train employees and to spot and correct risky driving behaviors. That’s not happening across the board.
Many clients say they don’t review, let alone analyze, their telematics data, according to Vitulli. He recommended fleets use the data to review which drivers are driving safely, and which need more training. Similarly, Denman said organizations may only look at their telematics data when investigating a crash.
Brokers advise clients to incorporate telematics data in their training programs and use it to identify common bad driving habits or drivers who are repeatedly being unsafe.
“That way you’re tying data back to specific responses,” Vitulli explained. “I know our loss control team is working to do that with our clients, and I presume everybody who’s a fleet safety expert is doing the exact same thing: trying to find ways of tying the data back to specific training and development.”
Hylant’s Denman said clients might expect to see immediate benefits when they implement a new telematics program. It’s up to the broker to manage their expectations — it can take up to two years to see benefits.
“They [the clients] are going to have claims, there are going to be losses, but if you can avoid losses or reduce the amount of a claim, everybody’s going to benefit from that eventually,” he said.
Commercial auto, faced with worsening claims severity and rising repair and replacement costs, has recorded 11 straight years of combined ratios at 100% or higher, according to Verisk.
“[Telematics] is a growing area,” said Jacobs, noting the technology already plays an important role in personal lines. “I think beyond a couple carriers who have done a lot … it’s still an emerging area in commercial auto and will continue to grow in the years to come. It could both help people drive more safely and help insurers better understand and price the risk that they’re insuring.”
