Analysis
5 Oct 21

Insurance: how connected data helps lower premiums

No matter how careful drivers are, how much training you give them or how low your insurance claims history is, the cost of fleet insurance keeps on rising. According to Consumer Intelligence, the cost of motor insurance has climbed 37.4% since 2014.

For fleets, insurance can be as high as 40% of overall fleet costs, so reducing premiums is high on the agenda for fleet managers.

Historically, the only way to do this was to reduce cover and increase your ‘excess’ liability. But that also meant increasing risk, the risk that something would happen outside of what was covered, or having to pay a high excess amount in the event of an accident. Even if costs were recoverable from a third party, the overhead for handling insurance claims was expensive.

If you’re interested in this, we have several in-depth articles on connected data and insurance in the latest issue of Fleet Europe Magazine (FEU124), which you can subscribe to for free here….

In addition, insurers have been unable to provide flexibility around fluctuating the level of cover to align with vehicle usage. Fleet owners and operators have paid the same premium for fully comprehensive insurance around the clock - whether the vehicle has been out on the road, parked up, or stored in a depot overnight.

Usage-based insurance (UBI)

Usage-based insurance (also referred to as pay-per-mile and pay-as-you-drive) is a type of insurance that relies on telematics data from a device (often referred to as a “black box”) installed in the vehicle. This gathers data that lets the insurance company know when a vehicle is being driven, how it’s being driven, at what time of day and for how long. Parameters that determine driving style include speed, acceleration, cornering, braking (whether it’s harsh or not), how far a person has driven and for how long they’ve been behind the wheel. This kind of data enables insurers to more accurately assess risk profiles and reward careful drivers with discounted premiums. It also enables them to offer flexible insurance to drivers who don’t own a car but use one occasionally through renting or sharing schemes. 

Connected vehicle data

Similarly, the location of vehicles and the time of day they’re being driven also informs risk assessments. Fleets could look at where it’s possible to change driving schedules to their advantage. Last-mile delivery companies, delivering to consumers who are out at work all day, could kill two birds with one stone by changing the time of day their drivers are on the road. Changing from peak daytimes to evenings between 6-9pm could, for example, cheapen insurance premiums and increase delivery success as consumers are more likely to be at home during these hours. Such initiatives won’t work for every fleet but if data (connected vehicle data or historical business data) suggests otherwise, it should be acted upon.

More effective accident management

Of course, where vehicles are concerned, accidents happen. There are few fleets that have not had to deal with at least one accident per year and the more vehicles there are in the fleet, the greater the risk. Accident management is part of fleet management and the way in which accidents are handled can have a positive or negative effect on the bottom line. Connected fleet data plays an important role in this by helping fleet managers, insurance companies (and other stakeholders in the accident management process) to administer claims quicker, more accurately and efficiently, thus speeding up vehicle repair or replacement and ensuring vehicle ‘on road time’ is optimised.

Insurance is one area in which technology (telematics and data in particular) is having a significant impact. It has helped spawn a raft of fintech companies offering fleet-specific initiatives, like UBI, that delivers flexibility and cost-savings but at the same (or greater) level of coverage.

You can deepdive into the benefits of connected technology for your fleet operations by reliving the Connected Fleets Conference from 30 September

Image courtesy of Shutterstock

Authored by: Alison Pittaway