The Pros and Cons of Telematics Insurance

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Insurance is a significant cost for fleet companies, and any way they can cut that down is undoubtedly considered a bonus. Telematics insurance as a way to lower prices is growing in popularity. Fleets with smaller vehicles usually pay about $1,000 per year for each vehicle, while fleets with large trucks can pay $1,500 or more. Telematics insurance can save an average of 10% to 15% off of those costs. How does telematics insurance work, and what are the pros and cons?

What Is Telematics Insurance?

Telematics insurance is insurance based on data taken from a vehicle. This data can include how far a car has driven, where it frequently goes, and highlight hard driving behaviors such as fast acceleration, hard braking, cornering, and airbag deployment. Insurers take this information from a car and determine what discounts they can offer a company. For example, fleets that drive less distance may receive a better deal than those that drive further distances. Fleets that implement safety features such as dash cams can receive higher discounts than those who do not. Many fleets that have already implemented these features are moving towards telematics insurance to enjoy these discounts. 

Pro: Many Different Models

There are several different models of telematics insurance. Most charge based either on how many miles a vehicle travels or how safely a vehicle travels. Having these options is crucial because not all fleets have the same needs. For example, a fleet that encourages safe driving behaviors and includes safety features like dash cams and in-cab coaching but drives long distances can still enjoy discounts with the Pay How You Drive (PHYD) model. The Pay As You Drive (PAYD) or distance-based model is perfect for fleets that are more local and do not drive as many miles. 

Con: Privacy Concerns

While sharing more information is becoming increasingly commonplace in the modern age, many people are still reluctant to provide detailed information. Some telematics data, including a vehicle’s whereabouts at a particular time, can be considered private to companies concerned about privacy. Insurers are combating this by limiting the amount of data they take from telematics systems to set company and individual minds at ease, though some sensitive information will likely always be required. 

Pro: Encourages Safe Driving Behaviors

Telematics insurance, particularly the PHYD model, encourages fleets to be more aware of their drivers’ behaviors and implement technologies to increase safety on the road. If they can get discounts for being safer, they are more likely to pay close attention and avoid dangerous behaviors like hard or aggressive driving. Furthermore, telematics and dash cams make drivers significantly safer. When fleet managers know exactly where a car is and can check in on the driver at any time, the driver is held accountable and will act responsibly. 

Con: Regulatory Requirements

Some states have regulatory requirements that cause issues with telematics insurance. New insurers have difficulty obtaining permission to implement telematics insurance because they must provide statistical data supporting the latest rating. They cannot get the telematics data until the insurance is in place. Regulations regarding continuous insurance coverage, expiration dates, guaranteed renewability, and upfront statement of premium charges can also cause hangups for companies wanting to begin providing telematics insurance. 

Pro: Savings in the Event of an Accident

If an accident occurs regardless of a driver’s safe behavior, telematics and dash cams can exonerate the driver. Insurers can review telematics data and dash cam footage to get an exact picture of what happened at the time of the accident, providing two advantages. The first is that they can more accurately calculate the damage to the car or truck. Secondly, as mentioned, they can prove fault, often exonerating the commercial driver, especially in cases of fraud. Doing so saves both the insurer and the driver thousands of dollars. 

Con: Costly to Implement

If a fleet does not already have telematics equipment or dash cams, there can be an expensive start-up cost. However, most fleets already have this equipment in place. A telematics system is required to be compliant with federal regulations, and dash cams are growing in popularity every year. Furthermore, the savings will soon pay for the cost of installing the hardware and software. 

Conclusion

Telematics insurance is the future in insurance for fleets. Since it is still new, insurers still need to smooth out a few kinks, but soon it will be easy for any fleet to have telematics insurance for their vehicles. Encouraging safe driving behaviors is crucial, and implementing new technologies is part of fleet management. To find out about telematics software and dash cams for your fleet, contact Azuga today. We are the leaders in fleet technology and can help you get on your way to insurance discounts and big savings.