Telematics Can Lead to Safer Driving and Cost Savings in Insurance and Fuel

Fleet managers have long relied on indirect measures to figure out how their drivers are performing.

They’ve monitored accident rates, watched for traffic tickets, and taken calls to the “How’s my driving?” number posted on their vehicles.

But newer technology makes it possible to identify — and correct — problem driving before accidents or other issues occur.

The growing field of telematics combines GPS and other wireless technologies with sophisticated computer algorithms to provide a real-time view of a vehicle’s operation.

Telematics can lead to safer fleets and cost savings in areas such as insurance, employee time off, vehicle down time, and fuel, said Tony Largo, director of commercial product analysis for Liberty Mutual Insurance.

The technology can track where a vehicle is, how fast it’s traveling, how sharply it’s turning, how abruptly it’s braking, and many other data points. On-board telematics units can include not only GPS but also equipment such as an accelerometer to measure motion in different directions and a linking device to tap into data from the vehicle’s own computers.

It’s common for the information to be accessible via a mobile app.

Many larger fleets, with 200 or more drivers, have been using some form of telematics for upwards of 20 years, Largo said. He estimated that about 20 percent of commercial vehicles have telematics capabilities.

Among smaller fleets, usage has increased by more than 15 percent since 2011, according to Liberty Mutual. The adoption rate among small businesses may be the result of a combination of trends, including lower costs, increased consumer awareness and technology advances.

The focus of telematics in most fleets has been on basic tasks such as figuring out where drivers are and how long they’re spending at each location. The use of more detailed metrics on how vehicles are being handled is a more recent trend.

Managers can take advantage of the technology to analyze the patterns of their best and worst drivers and identify training opportunities. Such steps can reduce the frequency of accidents by 40 to 70 percent, Largo said.

Commercial insurance companies often offer premium discounts to customers who adopt telematics packages, share their data with the carrier, and take steps to change driver behavior.

Largo predicts that within five years, 10 percent of all commercial automobile policies will be based on telematics. Businesses of all sizes will likely be offered auto insurance products and services tailored to their own needs based on the data generated from their fleets.

Information on speed, braking, average daily mileage, freeway versus non-freeway mileage, average nighttime mileage and many other variables will likely become part of the rate-setting equation.

Liberty Mutual plans to roll out its own set of reconfigured telematics services in the near future. Largo said more small business owners likely will adopt the technology as it becomes more prevalent and they see the potential return on investment.

After all, for every dollar of direct costs — such as liability and property damage — related to an accident, businesses face between $2 and $5 of indirect costs, such as employee and vehicle down time, according to Liberty Mutual.

Over the next five years, more vehicles will come off the assembly line with standardized technology platforms. As telematics service providers consolidate, scoring and data capture will also become standardized.

For the most part, data is still emerging on telematics and how it relates to claims incidents. But some trends have emerged. For example, Largo noted that if you’re driving between 11 p.m. and 6 a.m. on weekend nights, your chance of an accident is 40 percent higher than at other times.

He said that throughout the industry, telematics will also play an important role in setting personal auto insurance rates. At the moment, your insurance rates take into account numerous proxy measures, including your age, the type of vehicle you drive and where you live.

Telematics could mean fairer pricing for everyone. Beyond how you handle your vehicle, factors such as the type of weather you drive in and the kinds of roads you use could come into play.

Largo said, “If you can measure people’s driving behavior and tie it to a score that equates to a risk measure, that will be a more precise, more granular way of rating an individual driver.”

This article was originally published by James Ritchie in The Business Journals.

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