Fleet telematics systems – which use electronics and GPS devices to track the location and other characteristics (distance driven, speed, brake usage, time of day, etc.) of vehicles in a fleet – appears to be poised for rapid growth.
The information can be very useful in monitoring safe and efficient driving habits and reconstructing accident details. While widespread development of fleet telematics systems has been stymied by a series of patents held by
Progressive Insurance (Progressive’s voluntary “Snapshot” telematics device that can reduce auto insurance rates for good drivers has collected over 10 billion miles of driving data since 2008), those patents are under challenge. The U.S. Patent Trial and Appeal Board recently canceled several patents relating to telematics held by Progressive, which could open the door to mass market adoption of fleet telematics.
Jeff Stampura, founder and CEO of Advanced Insurance Products & Services, says he is confident that commercial usage-based insurance will be widely adopted. “The insurance industry is always trying to find new ways to differentiate itself and provide more value, and one way is to underwrite risk more accurately,” says Stampura.
“In the past, we didn’t have good predictive factors or good data, especially on the commercial side, to do underwriting – or more sophisticated underwriting – and pricing,” Stampura says. “And now, with telematics, that has all changed.”
While the presence of a telematics device alone may not impact a client’s rates, using the device to effectively monitor and coach drivers can lead to a discounted rate.
The National Association of Insurance Commissioners (NAIC) noted in a recent brief that the first Usage-Based Insurance (UBI) programs for personal auto insurance customers began to surface in the US about a decade ago, when Progressive and General Motors Assurance Company (GMAC) began to offer mileage-linked discounts that have since evolved to capture additional driving habit data. Telematics devices measure a number of elements of interest to underwriters: miles driven; time of day; where the vehicle is driven (GPS); rapid acceleration; hard breaking; hard cornering; and air bag deployment. The insurance company then assesses the data and charges insurance premiums accordingly.
The NAIC brief says UBI is poised for rapid growth in the US, with many experts predicting that up to 20 percent of all vehicle insurance in the country will incorporate some form of UBI within five years.
Data points that can be collected by telematics devices:
- Engine RPM
- Engine idle time
- Fuel consumption
- Hard braking
- Miles driven
- Trip start/stop times
- Trip start/stop locations
- Rapid acceleration
- Seatbelt use
- Route taken
- Time of crash
- Velocity
