For many years, telematics was the preserve of Formula One and other top flight racing teams. In recent years the technology has become more accessible and is now starting to appear in fleets of commercial vehicles. In the UK it has hit the headlines as insurance companies are starting to offer drivers cheaper insurance if they agree to have a ‘black box’ fitted that tracks the vehicle and reports back to the insurance company on miles driven etc. In both cases the ‘black box’ has been viewed with suspicion by many drivers as ‘big brother’ and ‘spying’. However, telematics holds the key to several different issues facing the motor insurance industry at the moment.
On the consumer side, with EU legislation banning premiums based on gender, and moves underway to change the way that young and learner drivers become qualified – for instance a ban on fast-track courses, and the requirement for learner drivers to be under training for at least a year – the insurers need to find new ways to calculate premiums. By encouraging customers to install telematics systems, not only can the insurer charge on a pay-as-you-drive basis, they can also score drivers on how safely they drive. Telematics systems can report on much more than simply tracking where and when the vehicle is driven. They can, for example, log when the driver speeds, detect harsh braking and fast cornering, whether a seat belt is worn, and generally identify aggressive driving style. This type of reporting could help insurers to introduce more cost effective policies for young or less experienced drivers.
On the commercial side, as organisations have increased duty of care for employees and several test cases for corporate manslaughter have been won, so telematics again could help. Driving is one of the most high risk activities for employees, and in any organisation that has vehicles within its business, whether they are delivery trucks or staff cars, insurance claims, compensation claims and maintenance are a significant cost. Simply by installing a telematics solution, the company can start to analyse when and where its vehicles are used, and how they are driven. This in itself will encourage employees to ensure that they adhere to company policy when using company vehicles. The organisation can start to look at ways to improve asset utilisation, fuel consumption, delivery schedules with the aim of providing better customer service, and tackle environment issues. All these activities have been well proven to help organisations save costs and improve efficient operations.
On top of all these benefits, insurance premiums could also be reduced. In the US the commercial insurance model is perhaps more developed than in the UK, in that they focus more on how a vehicle is driven, as well as by mileage. Indeed, insurers like Liberty Mutual are offering a 15% reduction on premiums for fleets where a telematics solution is installed, because they are seen as a better risk. Furthermore, they estimate that organisations can expect to save up to 40% on reduced claims and better maintenance of the fleet, due to the telematics solution.
The potential benefits of fleet telematics has been fairly well documented. Where organisations can really make substantial gains with telematics is by ensuring that the solution is fully integrated and sits on a platform that has the power to analyse vast amounts of location intelligence data to provide operational meaning. Such a platform would be hardware agnostic, meaning it could take data from any type of device installed in a vehicle. Hosted in the cloud on a Software-as-a-Service basis, the individual organisation does not need to find the computing power in-house with all the associated overheads and can also access industry-wide data enabling them to compare their own performance with the industry benchmarks.
Most devices are currently installed after market, but looking forward, devices will be installed during manufacture on an OEM basis, and then there is the trend to Bring Your Own Device that also must be addressed. By taking the location intelligence platform approach organisations are able to squeeze every last drop of usable information from their telematics solutions and apply it to making the business more efficient, and investment in hardware is protected.
For the insurance industry the case is also compelling. As well as being able to handle data from any telematics device that customers may wish to use, such a platform approach enables insurers to provide different schemes targeted at different market segments. For example, a young drivers’ scheme would measure different criteria to an older persons’ scheme, and it would have a different user interface, but the underlying mechanism for administering the scheme would be the same. This would give Insurers the ability to provide many different policies to meet different customer requirements.
As with any enterprise system, connecting different silos of information is the key to getting a birds-eye view of the organisation on which to base strategic and operational decisions. By combining telematics and vehicle insurance, using a location intelligence platform to bring together all the various data points, and analysing the resulting information, both the end user/customer and the insurance industry can benefit from huge cost savings and a better product that more closely meets customers’ needs.
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