MISSISSAUGA, Ont. — Insurance companies love data. They really do. And they’re very good at analyzing and interpreting data. So, it should come as little surprise that insurance providers are looking for ways to tap into the telematics data being generated by their fleet customers.
The term telematics is loosely defined as driver behaviour or vehicle performance data that’s transmitted from a vehicle to a Web site or other device for analysis. The term insurance telematics is just now entering the Canadian trucking industry’s dialect, though in other parts of the world such as Europe, it’s practically mainstream.
Scott Cober, vice-president, national leader with Marsh Canada’s trucking practice, told the Toronto chapter of the Fleet Safety Council yesterday that by 2017, there will be 89 million users of usage-based insurance around the world. Usage-based insurance, or UBI, can be broken down into two categories: Pay As You Drive (where premiums are set based on mileage driven) or Pay How You Drive (where premiums reflect driving behaviour, as measured by onboard telematics).
Insurance companies are particularly interested in PHYD insurance, which allows them to set premiums that are more indicative of future crash risks. The current norm is for insurers to set premiums that are based largely on past crash history, which says little of a fleet or driver’s likelihood of future crashes.
Cober said driving behaviour is two times more predictive of future claims than any other factor, which is why insurance providers are eager to access the telematics data being generated by fleets. Nine of 10 US insurers offer some form of usage based insurance, but Cober said in Canada, only Industrial Alliance is actively selling insurance in this way. Their program is aimed at young drivers, who can save significantly on their auto insurance premiums by volunteering to install an on-board device that collects data on their driving behaviour and then shares that data with the insurer.
But Cober predicted that by the third of fourth quarter of this year, three or four more Canadian insurers will be offering some form of usage-based insurance.
Cober said trucking fleets that are actively using telematics to monitor and, when necessary, correct driving behaviour, often see a 5-15% reduction in their insurance premiums. This is in addition to double-digit savings in fuel economy. One of the greatest challenges for insurers is that there is no standard for what data is collected and how it’s transmitted, or what thresholds are used to define risky driving behaviour. There are hundreds of telematics systems on the market and each one is different. Cober said he’s most impressed with the camera-based systems that record what took place inside and outside the cab in the seconds before, during and immediately after an accident. In many cases, he said, the truck driver is exonerated by these systems and when the driver is at fault, “at least you know it right off the bat, so we can set up the reserve and settle it.”
Canada has the strictest privacy regulations in the world, so installing the camera-based systems requires written permission from drivers.
Other telematics systems collect data on how a truck has been driven, analyze it and then create easy-to-interpret driver scorecards. These are great, but insurers are struggling with the inconsistencies between systems.
“The insurance industry needs a standardized scorecard,” Cober said.
Angelique Magi, vice-president of strategic initiatives with The Guarantee Company, agreed that standardization would make it easier for insurance companies to set fair premiums.
“We all have our own back-end systems. Data is great, as long as we have a place to put the data and more importantly, to analyze the data,” she said. “What we need in the marketplace, frankly, is a way to get your data to talk to our systems. That’s what we wrestle with. It doesn’t mean insurers are going to ignore telematics. We welcome fleets using telematics, it’s to the degree that you use it. If you can demonstrate that it’s part of your culture and show over time how you facilitate change in your organization or have benchmarks and have seen improvement, that’s where insurance companies really pay attention.”
Magi said that carriers that are using telemetics effectively to drive improvements in driving behaviour should make their insurance broker or provider aware of this, even in the absence of formal insurance telematics programs.
“Keep asking your broker or insurance company, when am I going to get credit for this?” she urged.
While the use of telematics data by insurance companies is still in its infancy in the Canadian market, there’s no question the trend will continue to grow. Cober said the insurance industry has identified 2014 as the “tipping point” for insurance telematics. He also warned that as the movement gains steam, the safer, more progressive fleets will take advantage of telematics to lower their insurance costs while those who shun the technology will be left in an ever-shrinking pool of higher-risk carriers, and will ultimately pay higher premiums as a result.