Technology such as telematics has failed to have a positive impact on insurance costs. With premiums continuing to rise, businesses need to find innovative ways to gain competitive advantage. Understanding the importance of data insights to enable fleets and their insurance partners to become better informed has never been more important.
Frustration and disappointment
Telematics devices have been a source of frustration and disappointment for many years. Commercial fleets and insurance companies have been unable to unlock the true value of this technology to positively influence insurance costs, claims mitigation and their overall risk strategy. The main challenge being the data.
After installing these devices some 10+ years ago, fleet operators have had to battle with unintelligible and complex spreadsheets packed with numbers, codes, and references. This led to frustration as the fleet operators did not have the time or the necessary expertise to dissect and understand the data they were receiving.
From that point onwards, two things happened. To reap some sort of value from this costly investment, fleet operators looked to telematics devices to help them better understand and influence their route planning to achieve more ambitious business goals such as reducing their overall carbon footprint. They then utilised telematics to better understand specific driver behaviours such as speeding or harsh braking, allowing them to discuss those behaviours with drivers and look at implementing corrective measures such as additional training.
Although fleet operators have reaped some benefit from these devices over the years, a chasm has now emerged between the fleet operator and the insurer. Given the complexity of how the telematics data is collected and presented, insurers have been unable to ingest the data and reflect that information into their risk pricing model.
Static factors are not enough
As we know, insurers of commercial fleets look at risk differently to personal line insurers. Rather than insuring specific individual drivers, fleet insurers insure a company as a complete entity. They have a traditional pricing model which is centred around static risk factors such as the size and type of fleet and miles per year – metrics which are used across all insurers in the market. But what would happen if they were able to take into consideration the dynamic behaviours of the fleet, i.e. what does the driver do when they’re inside the vehicle and how does that behaviour impact the loss ratio?
The data from telematics devices is already there and available but to help brokers and fleet operators negotiate the best possible risk transfer programme, a scientific approach is needed. There are huge amounts of emotion behind this story, but emotion doesn’t drive price, science does – and by science, I mean data. This is about driving transparency and treating customers fairly. Customers are currently being penalised for market conditions of which they have no control over – a situation that needs to change now.
The added challenge is the fact that fleets may have several telematics providers that will all have their own software running in the background but none of that software speaks to an insurer. This is creating inconsistencies across the market and failing to deliver a standardised risk pricing model that is robust and fair.
Inform to empower
There is an urgent need for an independent, hardware agnostic platform that acts in the interest of the fleet organisation rather than the hardware or the vehicles that they are using. That will empower them with freedom of movement to be able to divorce and choose partnerships that best suit their needs for the future.
The solution needs to be able to ingest the data from across the entire fleet and turn that data into a story that insurers can interpret, understand, and then reflect into a more robust and fair risk pricing model.
Furthermore, insurers need to consider a more open-minded approach and consider dynamic behaviours from telematics devices which can enhance their risk pricing in addition to the static factors that they use today. Only then can we bridge the chasm and enable the value chain to have more informed and confident conversations.
Learn more about Quest Automotive Fleet here.