Fleets Go Full Throttle, Buoyed By Telematics & Usage Based Insurance

Commercial vehicles witnessed a 19.2% drop in medium duty and 31.1% in heavy duty trucks this year, compared to a year earlier. The silver lining was in LCV deployments in logistics, driven by ecommerce and last mile deliveries. As for connected truck telematics, the market is slated to grow 10% y-o-y, from 26.6 million installs a year ago to 29.3 million now. Telematics, based on market growth till date, is projected to be a $17.1 billion market by 2025, reinforcing an acknowledged role as productivity enablers.

Commercial auto insurance, on the other hand, has been expanding due to growing fleet of vehicles and price escalation, at a 5.9% annual growth in recent years, reaching a total revenue of $46 billion. The largest 10 insurance groups comprise 43% of the total US commercial auto market. Progressive Insurance, with direct written premiums of $4.4 billion and market share of 11% is the leader. Progressive Insurance, an early telematics adopter, developed its first usage-based product in the mid-1990s.

Last week, Berkshire Hathaway GUARD Insurance selected telematics provider IMS for its commercial fleet insurance program. IMS’ DriveSync connected telematics platform offers a fleet management portal, device support, data collection, scoring and behavior assessment. IMS provides sensors for policyholders’ commercial fleet vehicles to gather driver behavior data. The data collected engenders significant savings in vehicle maintenance and fuel costs for commercial fleet organizations. Fleet management technology has seen an overhaul in the last few years.

Fleet expenditures are sharply influenced by driver wages and fuel costs. While wages make up 30%, fuel costs add to another 26% of expenses. Telematics is known to increase productivity and reduce overtime by 20-30%. Fleets also save a similar amount on fuel expenses with better driving practices and reduce 20-30 minutes off daily driving.

In commercial auto insurance, telematics is effective in validating certain rating factors utilized by underwriters in pricing. Garaging location and vehicle travel radius are examples of rating factors that telematics data can validate.  Applied across a fleet, it gives companies insights into effectiveness of safety training, driver hiring and vehicle maintenance. Monitoring drivers can alter behavior, nudging them to follow speed limits, reduce idling time, and stay alert when lane changing or braking.

A Willis Towers Watson study found crash rates dropping 80 percent in fleets monitored via telematics.

While carriers like GUARD partner with telematics providers, manufacturers such as General Motors have launched insurance services. GM returned to a business it abandoned 10+ years ago, by launching OnStar Insurance. Building on its years of safety expertise, it has expanded offerings to meet fleet managers’ needs, with four distinct offerings – Safety Services, Vehicle Insights, API & Data Services and Wi-Fi.

An alternative for insurers to gain access to fleet telematics data is through exchanges such as Verisk Data Exchange. Fleet customers of Geotab, which provides solutions to two million global customers, can opt to share telematics data with insurers participating in the Verisk Data Exchange. Few weeks back, Ford Motor Company joined the Verisk Data Exchange to allow vehicle owners easy access to Usage Based Insurance (UBI) programs from US auto insurers connected to the Exchange, including three of ten largest US carriers.

Zego, the first UK insurtech with an insurance license, recently acquired telematics pioneer Drivit, to obtain real-time driver behavior data in-house. Drivit’s technology is now embedded into Zego’s telematics app. Zego offers usage-based policies to delivery, courier or trade van fleets in the UK – reducing upfront costs for these businesses, partnering with RSA Insurance.

With fleets operating under UBI, allowing them to pay-per-mile, the average firm saw sizeable cost reductions compared to traditional products. Replacement vehicle firm Limitless Accident Management, which specializes in helping non-fault motorists stay mobile following an accident, cut its insurance bill by 63% since opting for such flexible policies.

Cover Image Credit

You get 3 free articles on Daily Fintech. After that you will need to become a member for just US$143 a year (= $0.39 per day) and get all our fresh content and our archives and participate in our forum.

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.