Telematics: How to protect employees and keep insurance sustainable

Using existing in-vehicle or third-party technology solutions, such as OBD (on-board diagnostic) devices, mobile phone behavioural/safety applications or even driver and forward-facing cameras to monitor fleet risks is not new, but several factors are now strengthening the case for telematics, including improving driver safety, and the need to address sustainability risks and concerns.

Financial drivers

Despite the growing prevalence of vehicle safety and advanced driver assistance systems, road-crash deaths remain stubbornly high in many major markets: Around 20,400 people were killed in road crashes in the EU last year, while US motor-vehicle deaths in 2022 were 30% higher than in 2013. Several factors are behind the figures, including changes in driver behaviour (such as speeding and distracted driving), the increase in miles driven post-pandemic, and the increase in larger/heavier vehicles (according to research from The Economist, in the last 10 years the heaviest 1% of vehicles in the US were associated with 41 deaths per 10,000 crashes, which is three times higher than the rate for median-weight cars.)

Along with higher costs of vehicle repair and values, the rebound in incident frequency has led to an increase in the cost of motor insurance, even threatening the affordability of cover for higher risk sectors like trucking in the US. According to industry statistics, US commercial auto premium rates have increased by close to 50% in the last decade.

When integrated into fleet safety and risk management strategies, telematics can significantly reduce incident rates, keeping drivers safe and ensuring motor insurance is sustainable long term. In collaboration with Zurich, one UK company in the data management sector recorded an 88% fall in incidents and a 78% reduction in damage cost after it integrated telematics and fleet management systems into its fleet risk management strategy.

Sustainability imperative

Another important factor driving interest in telematics is the need to turn sustainability goals into action. From a social and governance perspective, road crashes are a leading cause of work-related deaths, and are often the top cause of occupational fatalities for companies with large commercial fleets. Typically, organizations – and in some countries, individual directors – are responsible and liable for employee safety where fleet safety is concerned.

Data from telematics can also help companies meet their environmental goals. It can help reduce fuel consumption, emissions, and the wear and tear on vehicles by reducing mileage exposure and encouraging safer driving, which is recognized as being closely aligned to more economical driving. In case of the indicated UK company they achieved 15% fuel savings, although bigger savings may be possible. In one study, telematics data identified a 50% difference in fuel economy between identical cars over similar journeys, reflecting different driving styles.

Telematics may also have potential in addressing the grey fleet. Changes in working practices, such as an increase in remote and hybrid working, have resulted in an increase in employees using their own vehicles for work, rather than company owned fleet vehicles (there are an estimated 14 million grey fleet vehicles in the UK alone). Such vehicles are typically older and less fuel-efficient than the average company car, while companies usually have limited sight of maintenance and safety. Simple, telematic solutions, however, can bring grey fleet vehicles into view for fleet risk management

Faster claims response, less disruption

From an insurance perspective, telematics can make claims processes simpler and more efficient, which can help reduce the cost of claims, as well as improve overall service levels. In combination with automation and artificial intelligence, telematics can enable even faster claims notification and processing.

A rapid response and shorter settlement time can help reduce the wider financial and reputational impact of road traffic collisions for a business, shortening periods of business interruption and getting the insured back up and running sooner. This hidden cost of crashes is often overlooked: the cost to a business from delays, administration and time off work can be much more than damage costs to the vehicle.

AI powered telematics

Where telematics once meant fitting a black box to a vehicle, today a host of improved solutions are making driver safety technology more affordable and easily accessible. For example, telematic apps can be downloaded onto a mobile device that monitors work-related driving behavior, such as speed and braking, as well as provide advice and alerts to drivers. More affordable digital cameras provide yet more data, and can give context to driver behavior or an incident.

Telematic technology is continually evolving, with a greater range of sensors and increasing volumes of in-vehicle data, requiring more powerful analytics. AI is already driving the next phase of telematics, with even greater automation and more predictive, as well as detailed and accurate analytics. Potentially, the next generation of telematics will provide more relevant and timely feedback, alerts, guidance and advice to drivers and fleet managers to help further improve driver behavior, predictive vehicle maintenance, fuel consumption and route optimization.

However, telematic solutions are only as effective as their ongoing application: Companies will need to incorporate relevant data into their fleet and risk management systems, and act upon the resulting insights. Key to creating a safe driving culture is to foster continuous driver engagement, and to find innovative and new ways to incentives and reward positive behaviours, whilst working with those demonstrating less positive behaviors, to provide real insights, as well as the coaching and mentoring to nurture behavioral improvements

Driving safety risk culture

The case for fleet safety telematics has never been stronger. As technology improves, there are huge opportunities to do much more with telematics. By working with a forward-thinking insurer, fleet and risk managers can leverage technology to improve the wellbeing and safety of employees, reduce their environmental impact, and jointly manage their insurance and risk management approach through strong collaboration. Zurich is always looking to partner with companies that are willing to jointly embark on this journey and work together to improve fleet safety.

Originally published in Commercial Risk on December 17, 2024.