Insurance costs can be a significant pain for fleets. Two-thirds of fleet managers find themselves shopping for insurance every two years. Most fleet managers prefer a usage-based insurance (UBI) program as it considers the usage of their vehicles, whether that be miles driven or how safely they drive. Insurance telematics is an integral part of usage-based insurance. Without telematics, drivers would not be able to provide data to their insurance companies on their driving. What is insurance telematics, how does it work, and how does it save fleets money?
What is Telematics?
Telematics is the technology in vehicles that tracks metrics like speed, location, braking, acceleration, HoS, and more. It then transmits this data to an outside source such as a fleet manager’s fleet management software to view comprehensive reports that help them make decisions on how to improve fleet operations. The hardware is easy to install; it’s a plug-and-play system that simply plugs into the OBD port. Telematics has become commonplace in fleets all over the world for improving safety, efficiency, and reliability.
What is Usage-Based Insurance?
Usage-based insurance (UBI) is an insurance policy that varies in cost based on driver behavior. The insurer collects data from telematics and determines what discounts a driver can receive. There are two types of UBI: Pay As You Drive (PAYD) and Pay How You Drive (PHYD).
PAYD is also known as distance-based insurance and charges based on how many miles a driver travels. This program is ideal for personal use, as many drivers do not travel much. It may also work for specific service fleets that don’t spend a lot of time on the road. However, it is not suitable for most fleets, as they travel many miles every day.
On the other hand, PHYD is ideal for fleets as it charges based on each driver’s safety record. The advantage of PHYD is that insurers price premiums based on what they will be paying out for a driver’s risks. Therefore, low-risk drivers who engage in safe behaviors are more likely to have lower premiums.
How Telematics Can Lower Insurance Premiums
Fleet managers can use telematics to show how their fleet is being safe. Just installing a telematics system is sometimes enough to obtain an insurance discount. Insurers’ ability to see how safely a driver is performing can assure them that they are low risk. Adding another system like a dash cam can increase the chances of a discount. Dash cams send telematics data in the same way 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.
If an insurer does not provide a discount just for having telematics or dash cams, that does not mean hope is lost. 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 significant benefits of telematics is the ability to locate 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. If thieves strike a vehicle, GPS tracking can tell fleet managers exactly where it is. Typically, only 20% of stolen vehicles are recovered, and out of those, 30% 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 a crucial part of 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 worse, crashes. Fleet maintenance is an absolute necessity for keeping both fleet drivers and everyone on the road safe. Insurance companies know this and will offer discounts for telematics as a result.
Telematics is becoming a necessity in fleet operations. Fleets all over the world are taking advantage of telematics for its many benefits, including insurance discounts. Insurers want their fleet clients to implement as many safety features as possible to prevent huge payouts on their end, and telematics helps to ensure this. Azuga has telematics solutions for fleets of all sizes. Reach out to Azuga today to find out how to get started protecting your fleet and enjoying discounts from your insurer!