Leveraging Telematics for Insurance

Let’s travel back to the time before telematics. Insurance companies didn’t have much information to work with to determine a fleet’s rates back then. The most significant indicator of driver performance was MVR records and FMCSA violation data — but those only cover the things a driver gets caught for.

With no other data related to driving at hand, insurers settled for a different kind of data point: credit scores. Studies suggested that the higher the credit score, the better the driver. This approach left a lot to be desired, and insurance rates for low-risk and high-risk customers were about 25% of each other. 

That method of determining risk has changed significantly with the robust data telematics offer today. When insurance companies can see data proving your fleet is a lower risk, it can positively affect premiums and deductibles — and in some cases, much more than 25%.  

How Can Telematics Reduce Insurance Costs?

Before digging into the “how,” let’s explore the “why.” Telematics can help fleets negotiate better insurance policies in a few ways.

The first thing fleets should know is that an insurer’s top concern will be what level of risk a fleet presents. Their goal is to determine the fleet’s exposure level (based on miles driven, routes, and the time-of-day vehicles operate) and the cost of the claims for a fleet with the corresponding risk profile. Insurance companies use this information to charge a rate that will cover those costs plus a profit. If a fleet can prove, with data, that their drivers present a lower risk, insurers may assign a lower risk profile, which can yield financial benefits. 

“Programs put in place that help avoid or mitigate risks can lower the claim frequency and severity, which in turn lowers annual premiums,” said Jim Fasone, ARM RPLU, senior vice president, enterprise sales and partner networks for Alexis Networks. “While savings on premium payments after adopting telematics could vary greatly, fleets could realize premium reductions of at least 10% annually. In addition to premium savings, the lower risks will also reduce the amount of self-insured costs associated with most insurance programs that fleets pay in addition to their premiums.”

Telematics data is so valuable in risk assessments that some insurers cover the cost of telematics devices since they go together with reducing claims. It’s important to ask insurers about telematics incentives, as they will depend on the company. 

“Programs vary quite a bit as some provide policy discounts, while others provide bundles that include discounted pricing on the telematics equipment. Then some insurers provide both,” said Jim Angel, vice president, video telematics for EROAD.

Erin Gilchrist, VP of fleet evangelism at IntelliShift, saw the insurance benefits of telematics firsthand when she managed a self-insured commercial fleet. 

“We had a very, very high deductible, so our organization had to have a lot of cash on hand,” she said. “When we were able to reduce accidents and reduce the severity of accidents and show consistency in our fleet safety program, we were able to reduce our deductible almost in half. We could do better things with that cash than have it sitting there waiting for us to get in trouble.”

Whether you use telematics to operate a safer fleet or to prove just how safe your fleet already is, it’s likely to result in lower costs than without telematics. 

“Telematics is here to stay. The insurance companies are all for anything that will create more data so they can better underwrite and price risks,” said Joshua Freet, head of sales & trucking at Zinc, a trucking insurance provider. “The premise is simple and fairer in theory — safer fleets pay less or are given a higher discount, whereas fleets with more risky driving and prone to accidents will pay more or not be afforded additional discounts.”  

Get the Data

The first step in leveraging telematics data for insurance purposes is accessing the data itself. 

With insurtech on the rise, where insurance companies provide the telematics device and a discount for using them, insurance companies can collect data on those they insure. This gives them great insight into not only how your fleet is performing but also how it compares to all the other fleets they insure, and the information is used to determine a rate that will be profitable for their company.

Lisa Paul, chief strategy officer for insurance broker Hub International, said the rub is that some insurers don’t share the data with the fleet. 

“Many insurance companies are using the data solely to their pricing advantage. It’s not providing a great deal of value back to the customer other than reduced insurance rates,” she said. “So as a broker advocate, we believe strongly that the customer should understand their data. It should be agnostic to whatever insurance company they may need to pivot to in their business. And they should be working with their broker to leverage their data, even if they must change insurance carriers annually. Sharing your data with your broker and risk advisor could be key to leveraging that data in your next renewal.”

The other downside of not having the data is fleets have no visibility into how they score against their peers, which could result in a higher rate. 

“One of the things we’ve done at Hub in the last year is investing in technology and digitalization to come up with our score. We did this mostly to tell a fleet their score and how they compare against their peers before we share their information with the insurance company,” Paul said. 

Beyond being blind to their scores, not having access to data shackles fleets from using data to make safety improvements that can yield savings beyond the initial premium discount. 

“For the same reasons the insurance companies value and use driving behavior data, trucking companies need that information too,” Freet said. “What better way to find out who your best drivers are so you can encourage them to keep doing what they are doing and also find your potential problem areas so fleets can address those before a claim happens.” 

Build a Safety Culture and Demonstrate Improvements

Armed with data, fleets can then use it to implement safety programs — and show that they’re working. 

“Having a strong safety program is essential,” Alexis Networks’ Fasone said. “The foundation of a good risk management program is to utilize technology to mitigate risks and improve outcomes. In the transportation industry, that also means saving lives.”

Using telematics data to create a safety culture is the first step. The next is to demonstrate your actions based on the data to your insurance provider. 

“Anytime your insurance provider or broker can see that your organization is taking positive steps towards reducing accidents, that is a great opener, right? They’re going to want to talk to you,” IntelliShift’s Gilchrist said. “Showing that you’re implementing new programs or policies, that you have a safety plan, or telling how you’re building a culture of safety in your organization, big or small, is a great way to show your insurance partner that you’re taking those right steps.” 

Daniel Bancroft, North America transportation practice leader for WTW, insurance brokers, and risk consultants, agreed that communicating results is key to making the most of telematics data.

“Fleets should communicate with underwriters about the value telematics delivers and how they have embedded a culture of safety in their fleet. Share metrics with them that show the ‘before and after’ of telematics adoption with a focus on reducing claim frequency and severity,” he advised. “Ultimately, you don’t want to rely on an insurance application for your next renewal. Instead, paint the picture for your insurer using all the tools available from your telematics partner: fleet performance data on operations and video telematics that illustrate those areas of safety impacting risk and insurance.”  

Angel from EROAD sites an example of a 540-truck fleet that used a video telematics system that looked at the number of miles driven compared to the number of risky driving events. After 90 days of deployment, the fleet averaged an event every 648 miles driven. Using the data to coach drivers, the event per mile metric improved to 3,448 miles nine months later. 

“This was almost a six-times reduction in events and eliminated harsh stopping from their top three events list, which had a very positive effect on insurance negotiations,” Angel said.

For E. Melissa Dixon, ICC practitioner, principal for Dixon Truck Insurance, it’s not just about getting the data but putting it to use. 

“What brings down a fleet’s insurance premiums is having a well-run organization with a strong safety culture,” she said. “Utilizing the benefits of telematics helps raise your company to the top concerning safety and efficiency, but that only happens if the tools incorporated are utilized properly. Those in charge of managing the systems must have the power to enforce the ‘findings’ to build a better and safer company through accountability.”

Influence Driver Behavior

Although things like poor maintenance and road conditions can pose safety risks, for the most part, safety falls on the shoulders of the driver. With telematics, fleet managers can use data to improve driver behavior, yielding insurance benefits.  

“Telematics is the first step to improving your insurance premiums because you can modify the driver behavior quite a bit, and you can make reductions in accidents,” IntelliShift’s Gilchrist said. “But the biggest piece is severity; what insurance companies care about is what kind of accidents you are having.”

When trucks are equipped with telematics, fleet managers gain visibility into unsafe driving behaviors like speeding, hard braking, and harsh turning or acceleration, then coach drivers to correct them. 

“Utilize the valuable information you get from these telematic devices to train and retrain when necessary properly, let bad drivers go when necessary, and praise good driving behaviors that help to avoid accidents when necessary,” advised Chadwick Willoughby, CIC, CWCC, TRS, president of Farris Evans Insurance. “Telematics information is king when utilized.”

Telematics platforms can also use behavior metrics to create driver scorecards, which helps drivers see how safe they are driving. 

“A fleet management system with telematics capabilities can help avoid unwanted behavior such as harsh or distracted driving. The result is fewer violations and accidents with improved CSA scores,” said Adam Ortlieb, senior product marketing manager for telematics provider CalAmp. “Driver scorecards can provide a clear snapshot of how a fleet or specific group performs. On an individual level, scorecards offer an additional carrot and/or stick for fleet managers to create transparency, reinforce training, and introduce extra motivation to improve through peer pressure. 

Fasone shared that Alexis Networks’ partnership with telematics provider Shiftyy includes a phone application that shows the driver behavior events for the day and the driver’s overall scorecard to see how they rank in their fleet in real-time after their shift. In applying Alexis’ predictive insights to this data, fleet managers and insurers can avoid future claims based on analyzing those behaviors.

“This has been incredibly effective with improving driver behavior on the road,” Fasone said. “The adage, ‘an ounce of prevention is worth a pound of cure’ is very applicable here."

Another example is the Hub Mobile Safe App, which calculates driver scorecards and pushes the data to collision detection and claims notice.

Fleets can take scorecards a step further by creating incentive programs based on the data, whether a contest for the best driver score or a pay scale based on the scorecard. Using the data this way can help drivers see what’s in it for them. 

“Incorporating this data into effective driver retention incentive plans could also be key to keeping insurance costs low while maintaining the best drivers,” Paul said. 

Gilchrist underscored how focusing on the “why” of telematics also helps drivers get on board with safety initiatives. Scorecards are one way, but fleet managers can also drive home benefits like personal safety. 

“Create an environment of safety around the driver, where you’ve used telematics to create a bubble that helps protect them from behaviors inside and outside the cab every day. Where the driver can focus on their vocation, like carpet cleaning or HVAC, and we can make being a professional driver easier for them because we have given them all the tools and the technology they need to be successful,” Gilchrist said. “That’s what we should be thinking about. All the time. And when drivers understand you’re doing these things because you really care about getting them home safe every day, compliance makes sense to them.”

Employ Video Telematics

Employing cameras can be another way to get visibility into driver behavior and coach it. But beyond that, having video footage in the event of a crash can exonerate a driver and/or a company — and that’s very appealing to insurance companies. 

“Insurance companies desire trucking companies to have cameras, as over 75% of truck accidents are caused by four-wheelers, not the 18-wheelers,” Dixon said. 

When trucks are equipped with cameras inside and outside the vehicle, fleets can demonstrate exactly what both drivers were doing during the crash. Often, this means the first not-at-fault accident pays for the solution itself. But when a driver is the victim of a false claim and can’t prove the other driver was at fault, the financial consequences can be devastating for future insurance rates and court costs or liability suits. 

“Telematics with video gives you the visual information you need along with the data from your vehicle to get the whole picture,” Angel said. “This lets your insurance company know exactly what to do, whether it is exonerating your company and driver or aggressively seeking to close the claim. Either way, it saves a costly amount of time for both your company and your provider.”

Hub’s Paul said providing footage, and any other crash information to insurers quickly can help resolve claims faster. “Linking video telematics to Hub Video View allows fleets to take the technology further by linking video directly into a push of first notice of loss. This gives adjusters accurate information to determine liability and protection for trucking companies.”

Gilchrist said video telematics could also help fleets control some of the “uncontrollables,” like waking up a driver falling asleep or alerting a driver when they’re not looking at the road. Outward-facing cameras can also help manage the actions of other drivers. For instance, if the driver ahead suddenly stops, the system could alert the driver or the vehicle can help them stop. 

“When you install a camera in the vehicle, you not only start to control what’s happening inside the cab, even more so than you did with telematics, but you also can see outside and start to control the uncontrollable, which is all of those other drivers on the road,” Gilchrist said. “Controlling the uncontrollable will reduce the severity of accidents, which is what insurance companies care about."

The Cost of Skipping Telematics

Putting telematics data to use can improve fleet safety and lower insurance costs. The data is so useful that, in addition to rewarding fleets who use it, insurance companies may want to avoid insuring fleets that don’t. 

“The best fleet operators seek to lower their overall ‘cost of risk,’ i.e., costs related to claims, insurance, and safety expenses,” Bancroft said. “From the insurance underwriting viewpoint, any fleet without telematics is a risk to be avoided.” 

Work Truck knows that fluctuating fuel and insurance costs is a huge burden to on your fleet. Check out additional resources on rising insurance and fuel costs to help impact your bottom line today.