Lowering insurance costs through telematics

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Technology is being deployed more and more frequently as a tool in the truck insurance market for generating more accurate and timely data concerning the risk-profiles of carriers. But now more fleets are jumping on the technology/insurance bandwagon as a way to lower their insurance premiums.

A new survey conducted by LexisNexis Risk Solutions backs that up as it determined that consumers and fleet managers alike are more willing to adopt usage-based insurance (UBI) programs linked to vehicle data generated by telematics systems.

Not surprisingly, price and savings are the top factors driving the fleet managers to engage in UBI programs – all despite what LexisNexis called “significantly” less insurer marketing for UBI, such programs maintaining a relatively strong “awareness factor” of around 25% of the fleet managers polled.

The firm’s study also delved into the effect of what it called “value-added services,” mainly fleet management capabilities, within a UBI program offering. Interesting, Ernie Feirer – VP and GM of commercial insurance for LexisNexis – said the poll found that small fleets want UBI, with or without fleet management services, as the find the UBI insurance discount “appealing.”

“Two-thirds of small fleet managers shop for insurance every two years or more,” he explained. “These fleet managers are looking for ways to save money and our study shows 27% of them would sign up for a UBI program. This leaves a lot of room for growth and a huge opportunity for carriers offering UBI.”

Other UBI-related fleet trends noted in the survey LexisNexis include:

  • Saving money on commercial auto insurance is extremely important to three-fourths of fleet managers.
  • Some 72% of fleet managers are more likely to enroll in usage-based insurance under a three month trial.
  • Small fleet managers also value services such as stolen vehicle tracking, fuel consumption/efficiency updates and automatic emergency crash response.
  • Commercial fleet managers are also receptive to UBI programs that incorporate mobile technology as 73% of small fleet drivers have smartphones.

“Our study has found some of the traditional barriers are beginning to subside, such as the difficulty to use and the fear that insurance companies will have too much personal information,” noted Ash Hassib, senior VP and GM of auto and home insurance at LexisNexis. “This shift shows us that consumers and fleets are becoming more trusting of telematics, and therefore more likely to adopt.”

On the consumer side of the ledger, while insurance rate discounts continue to be the number one focus point in UBI adoption, more are now viewing telematics as a “legitimate resource” for ensuring car safety for themselves and their families.

Some examples include:

  • Interest in teen tracking or knowing how your child drives has increased by 12% since 2013.
  • Roughly 45%of those surveyed are more likely to adopt UBI to get information on how others in their household are driving
  • Interest in safety features, such as emergency roadside assistance, automatic emergency crash response and stolen vehicle tracking and recovery has increased by 6% since 2013.
  • Similar to fleets, consumer interest in “mobile UBI” is also growing – increasing from 29% in 2013 to 34% in 2014. Additionally, smartphone penetration among enrolled drivers is expected to be high.

“Smart devices, smartphones and smart cars are converging to create what should be a smart insurance choice for safe drivers and their insurers,” noted Ellen Carney, principal analyst with Forrester Research, Inc., in a report the firm released this June dubbed The Next Act For Usage-Based Car Insurance.

“That policy option is a win-win for the insured and the insurer: Customers pay lower premiums and improve their driving, while insurers attract safer and lower-risk drivers,” she added. “What is surprising is how few U.S. consumers have actually bought it.”

That may change quickly for consumers and fleets alike, I think, once fears concerning the security and usage of such telematics-derived data is spelled out.

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