Telematics has become a more integral part of the risk management of commercial vehicle fleets, which helps to reduce the frequency of incidents, but it can also increase repair and replacement costs.
However, the advanced hardware is only the beginning of the story, because careful management of the database produced by telematics systems is absolutely necessary for effective risk management, say sources.
Telematics hardware, such as sensors, cameras and other data acquisition devices, combine telecommunications and informatics and make it possible to share information wirelessly.
Telematics “can be very useful” and is becoming more common in large fleets, says Dennis McGuire, non-life insurance manager in Des Moines, Iowa, for Nationwide Insurance Inc.
“As part of an overall fleet program, more companies are using telematics data to evaluate and improve driving behavior and vehicle safety,”; said Sergio Cartagena, Vice President, Senior Underwriting Manager, Global Risk Solutions, for Liberty Mutual Insurance Co.
The technology generates a large amount of data that measures a variety of attributes, which requires business owners and fleet managers to have a sound plan for determining which data is most useful, how it will be collected and how it will be used, Mr. McGuire said.
Knowing how to turn data into information that can be incorporated into action plans is an important part of a successful telematics program, Cartagena said.
“Installing this technology is not the answer to everything. You need to manage data and drivers,” Nicole McMurtry, national transportation vertical manager in Oak Brook, Illinois, told USI Insurance Services LLC. about lane departure, may indicate negligence on the part of a fleet commander, she said.
While specific technologies reduce the number of accidents, the cost of the technology can increase repair costs, data shows.
Payments for physical damage claims for vehicles equipped with collision warning systems were on average $ 117 higher than for those without the system, according to a study by the Insurance Institute for Highway Safety and the Highway Loss Data Institute. However, the same study shows reductions in the frequency of loss incidents and the frequency of injuries when a vehicle is equipped with a collision warning ahead.
“It costs more,” McMurtry said, adding that from a liability perspective, telematics information can help manage and mitigate claims.
Telematics has proven useful in acquitting drivers who were not at fault in an accident, says Matt Merna, New York-based senior vice president and Chubb Group division manager, North America’s headquarters, for Chubb Ltd.
Telematics are “certainly helpful from a loss-reducing point of view,” but they increase both repair costs and times, McGuire said. There are more parts in vehicles equipped with telematics, and in some cases component availability may be limited.
In addition to the security gains shown in the study, telematics users are seen more positively by insurers, sources said.
Cars and trucks equipped with telematics cost more, but “guarantors like safety features in vehicles,” says David Carlson, leader of the U.S. auto and manufacturing industry in Cleveland for Marsh LLC.
“In general, insurers like to see a newer fleet where the technology is most likely available,” says Nationwide’s Mr. McGuire.
Better and more comprehensive data can also help a business owner provide more complete information to underwriters during the application process. “Complete applications robustly. This is where technology and telematics help,” said James Auden, Chicago-based insurance manager at Fitch Ratings Inc.
Sources generally agree that although telematics programs should be rolled out by management with great transparency for drivers and workers, the growing use of technology means that employees should not be surprised to find telematics on board, especially with rising proportions using the industry.
Mr Auden said concerns over the integrity and management of data remained high in the wake of growing data breaches and other cyber incidents.
Katie Wildman, an alternative risk transfer adviser in McKinney, Texas, for BevCap Management LLC, said about 75% of the wholesale distributors in one of the prisons she handles have implemented telematics “and no one has regretted doing so,” she said.
Smart executives and business owners believe that telematics is one of their best risk management tools, and no one has removed equipment because it did not work or provide benefits. Although the down payment costs vary, users believe that the systems pay for themselves.
While return on investment analyzes are still being evaluated, available data suggest that telematics can increase communication, potentially reduce the number of incidents and claims filed, improve safety and productivity and reduce downtime – “all of which can lead to better results for a company’s security program” , in Mr. Merna.
Drivers and employees, after some initial resistance, embrace telematics once they are shown that the tools can be used to reward improved driving behavior and strengthen a sense of responsibility in the event of an incident, Wildman said.
Security design technology is often expensive to repair, maintain
Vehicle technology, especially safety technology, is often seen as sensors and computerized systems designed to avoid collisions.
However, safety technology also involves vehicle design and engineering, such as adding so-called “shrinkage zones” and designing lighter vehicles for environmental reasons, which also increases safety, albeit sometimes at the expense of increased physical damage to a vehicle, sources say.
“Technology is not just electronics,” said David Carlson, Cleveland-based leader in the automotive and manufacturing industries in the United States for Marsh LLC.
When vehicles are lightened to reach emission targets, stronger materials and components are used – such as newer “super steel” -.
“Steel can be very light and very strong,” Carlson said, adding that physical safety components continue to protect occupants when electronic safety measures fail.
The US Department of Energy says that a 10% reduction in vehicle weight can result in a 6% to 8% improvement in fuel economy. “Advanced materials are essential to increase fuel economy in modern cars while maintaining safety and performance,” says the DOE on its website, and it supports such efforts through its Vehicle Technology Office.
Vehicles built with wrinkle zones, which are designed to absorb energy and protect passengers, often suffer extensive physical damage.
“A large portion of the car needs to be replaced,” says James Auden, Chicago-based insurance manager at Fitch Ratings Inc. This can lead to increased parts and labor costs and sometimes longer repair times.
“Cars will be a lot more in total,” said Mr. Auden.