The business case for commercial insurance telematics, explored by Louis Bedigian [Ins.Bedigian.2016.03.18]
Many fleets use telematics to keep track of their vehicles but that technology is underutilised when buying insurance. Instead of using telematics to get a discount from UBI providers, fleet managers continue to rely on the same-old policies.
“Telematics aren’t used for the insurance side of things,” said Blair Currie, vice-president of business development at IMS. “They are used for the risk-management side.”
While there is the potential for small, medium and large-sized fleets to share their data and secure better rates, “that’s not kind of the game that has been played so far,” Currie explained.
“We had a few programmes that people experimented with but, generally, it has not gained traction,” Currie added. “I would say that, when we look at telematics, it’s generally a personalised experience when it comes down to insurance. Look at the penetration – you’re talking the United States, maybe 5%, and Canada, maybe 2.5%, maybe less. There’s a long way to go in personal lines. Then in commercial lines it’s going to take a bit more time for businesses to catch up.”
Gail Gottehrer, an attorney and partner at Axinn, Veltrop & Harkrider LLP, believes that drivers had a “rude awakening” when they tried UBI and realised they did not want an insurance company to record their every mistake.
“It was a little too invasive,” said Gottehrer. “I'm not really sure of all the reasons but the statistics show it hasn't taken off in the US the way they people expected it to."
Consumers might not like the idea of sharing their driving experiences with an insurance provider but they may not have a choice if their employer adopts UBI.
“The company has the liability,” Gottehrer continued. “If you have an accident or if the worker does something wrong, the company is ultimately responsible.”
As a result, Gottehrer said that legal issues are clearer in an employment context because the employer is not going to knowingly hire or retain someone that is not driving safely.
“There certainly can be lawsuits [over privacy concerns],” said Gottehrer. “Anyone who can pay the filing fee can file a lawsuit. But I think in those situations the employer is in a really good position because it's the employer's vehicle and work time, [and] the employer is going to have the ultimate liability.”
Robin Harbage, director at Willis Towers Watson, said that smaller fleets might be willing to adopt insurance telematics if they cannot afford their own telematics equipment but only if the insurer offers to subsidise the cost.
“If the insurer said, ‘Look, I can get you some information about your drivers and prove that you have a well-managed fleet, I can give you good/better rates,’” then fleets would be interested, Harbage explained. “‘At the same time, because you’ve provided this, I’m subsidising the cost of the telematics.’”
Safety could also play a role in attracting fleet managers. “It’s going to have a massive impact on safety,” said Hugh McTavish, president of Godfrey-Morrow Insurance and Financial Services. “It’s not big brother watching, it’s you watching. If you’re getting feedback, even if it’s just coming to you, you can change behaviours.”
McTavish thinks it’s important for drivers to see the results for themselves. “I think if you have a behaviour, you can change it for a short period of time but it’s not long term,” he said. “Unless you’re getting constant feedback, your old behaviours are going to sneak in.”
Currie said there are not many commercial lines for UBI. And with consumer adoption still relatively low, he thinks it could be a while before fleet managers fully embrace user-based insurance.
“Personal lines will evolve to 10%, 20% of the market, maybe even more, before commercial lines start to catch on,” said Currie. “And it’s like anything: as the technology gets cheaper and it gets a little bit harder to make money from it (because there’s more players involved and more competition for the money that’s in the business), they’ll start to look for different segments.”
Currie said that young drivers are a hot segment in the UK while American and Canadian insurers are looking for mainstream consumers.
“Then it’ll break off into specific segments like young drivers [and] older/mature drivers who have a different need, [as well as] commercial lines,” Currie speculated. “I’d say we’re about two years away from that.”
In the meantime, Currie believes that fleets could benefit from products like InsureMy, a time-based insurance product developed by Godfrey-Morrow.
“Fleets have many interesting characteristics,” said Currie. “First of all, there just aren’t enough qualified drivers out there. As a result, a lot of the vehicles remain idle. The owners, of course, say: ‘Why would I want to pay for 365 days of insurance when the trucks are only moving for 100 days of that?’”
InsureMy charges fleets for the full year but provides a refund for the days when a vehicle is not used. “That makes a lot of intuitive sense because they can calculate the days the car isn’t moving,” Currie concluded.
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