This white paper explores several significant concerns held by insurance carriers, agents, and brokers while providing real-world examples of how to reduce claims substantially. Understanding fleet needs and what motivates them lies at the heart of these concerns.
Several major concerns held by insurance carriers, agents, and brokers play a large part here. The first pertains to how long a carrier can afford telematics if they are not confident it will produce fleet safety results. The second question relates to promoting telematics at the agent and broker channels alongside the best business model to support this discussion.
These concerns can lead to carrier decisions that create a negative self-fulfilling prophecy by selecting solutions that do not address needs but instead seem less cost risky. Additionally, these concerns may cause carriers to sit on the sidelines while their competitors advance fleet telematics to reduce claims and gain competitive advantages. We will explore these two interrelated concerns below.
Why has commercial insurance telematics adoption taken so long when the need to reduce claims continues to grow?
Let’s begin with a foundation for understanding fleets that will help solve carrier concerns. Four major stakeholders are impacted by fleet telematics and safety, as shown in Figure 1 Above. The four stakeholder roles can inherently conflict with one another, even when the same person shares several of these roles. The fleet manager focuses on the fleet’s health and keeping vehicles on the road. The operations (Ops) manager cares about running the business, ensuring customers are cared for, and maximizing driver and vehicle usage to generate the most revenue.
The safety manager is concerned with insurance, liability, and safety. The safety manager wants to reduce insurance costs, the company’s liability exposure, and worker compensation claims. Lastly is the driver, who is most often evaluated for their performance related to core business tasks and making customers happy but not always on driving behavior.
Fleet telematics was traditionally built and marketed almost exclusively for operations management. Since each stakeholder's goals and daily objectives are not always aligned and may inherently conflict, traditional fleet management products cannot adequately address safety. If the operations manager must run reports or perform unrelated tasks to address safety, this may impact their compensation and performance related to the core business.
Further compounding the challenge is the driver who may be at odds with management and under pressure to get the job done. The driver will typically adhere to whatever direction or guidelines seem important to management, either directly specified or implied. Thus, if safety is not a priority for the operations manager, neither will it be for the driver. Additionally, if there is a conflict between objectives, the driver will choose the path leading to the most personal gain and the least pain.
For example, fleets often employ a fleet telematics tool to save gas, reduce gas fraud, improve routing, manage time, and satisfy other operational needs. Some telematics products have add-on safety features that are not well integrated. If the fleet operator is not motivated or too busy to deal with this hassle, those safety features will go unused. This compounds driver safety because if a driver’s speeding or aggressive driving goes unnoticed, this will reinforce the same behavior in the future.
The safety challenge becomes more complicated when the fleet is larger, and the operations manager is often a branch manager, as shown in Figure 2. Fleet and safety managers may be in a corporate office and removed from regular branch activities in this scenario. The safety manager may be just one of several influences on the operations manager. Additionally, operations managers may have no direct reporting to the safety manager. Regardless of the size of the fleet, there is still no real benefit for the driver. When fleet tools don’t address the needs of all stakeholders and engage safety throughout the users’ experience, especially for drivers and operators, fleet safety can be challenging to achieve.
How to Save Money on Fleet Insurance
Once you find a fleet solution that meets the needs of all stakeholders, how can you obtain a lower premium? We want to ensure our vehicles have the best insurance, but it can be complicated by high premiums, especially for fleets. Here are some ways you can bring that premium price down.
Fleet managers can use telematics to show how their fleet is safe. Just installing a telematics system is sometimes enough to obtain an insurance discount. Insurers’ ability to see drivers’ safety records can assure them that the fleet is low risk. If you add a system like a dashcam, you can increase the chances of a discount. Dash cams send telematics data similarly and track even more behaviors that indicate distracted or drowsy driving. Many fleets all over the world are taking advantage of dash cams already. Insurance companies like them not only because they encourage safe driving but because they can exonerate drivers in the event of an accident and save the insurer from a massive payout.
Don’t worry if your insurance provider doesn’t give discounts just for having a telematics system or dash cam. These features provide detailed reports showing a driver’s safe behavior over time, and fleet managers can prove drivers’ good habits to insurers and obtain discounts that way. Most UBI plans will accept one of these methods as acceptable proof of safe driving.
One of the primary uses of telematics is for tracking vehicles. GPS tracking allows fleet managers to track vehicles every day and ensure they stay on task and complete their jobs efficiently. However, there is another use for GPS tracking. When thieves strike, GPS tracking can tell fleet managers exactly where it is. Typically, only 20% of stolen vehicles are recovered, and 30% of those come back damaged. If fleet managers can tell police exactly where a vehicle is, police can recover it quickly before the thieves have time to damage it extensively. This efficiency saves the insurance company a massive payout, so they often provide discounts for telematics.
Keeping Up With Maintenance
Staying on top of vehicle maintenance is crucial to keeping fleets effective and safe. Telematics lends itself to predictive maintenance. Breakdowns are expensive for fleets, and replacing vehicles is costly for everyone. Telematics warns fleet managers when maintenance is due before the vehicle breaks down or crashes. Fleet maintenance is essential for keeping both fleet drivers and everyone on the road safe. Insurance companies know this and will offer discounts for telematics as a result.