Insurers are working to integrate data into their underwriting. Will commercial fleets adopt these technologies?
Early in December, Nationwide published market research indicating that both commercial and consumer insureds are eager to use telematics for vehicle risk management.
“Many middle-market business owners face added concerns related to the safety of their drivers and fleet vehicles,” said Pete Frey, director of Commercial Lines Telematics at Nationwide.
“The results of our surveys highlight a tremendous opportunity for carriers and agents to change the conversation around telematics from being a nice ‘add-on’ perk, to what it really has become – an essential tool for operating a fleet-focused business.”
While telematics has been used to price personal auto policies, its use in underwriting for commercial fleets has been slow to catch on. The survey looks at insurance agent and business owner’s perspectives on the use of telematics and presents four-key themes that surround the issue.
4 Key Themes to Watch
Nationwide’s survey identified four key themes for commercial agents and middle market business owners with fleet vehicles:
- Agents underestimate business owners’ knowledge and interest in telematics.
- Middle market business owners are ready and willing to invest in telematics.
- Safety and operational benefits are top of mind for middle market fleet owners.
- Carriers/Agencies can better support agents in addressing client concerns.
Agents believe distracted driving is the top cause of accidents, but business owners see it differently, citing driving under the influence, driver error, road conditions and weather as leading causes of accidents for their fleet vehicles.
Agents underestimate business owners’ knowledge and interest in telematics, and 14% of agents said they don’t think clients would pay at all for telematics, yet 93% of businesses say they’d pay to ensure a safer driving experience.
Some 70% of business owners would be willing to pay between $20-$40 per month per vehicle, while more than 60% of agents said they think clients would pay $30 or less a month.
Among the owners that haven’t adopted telematics, their biggest deterrent is a lack of knowledge. Nearly 40% of producers and 70% of customer-service representatives don’t feel they have the resources needed to counsel clients effectively on telematics.
Business owners estimate their fleets experience 7.5 accidents per year. They also indicate they’ve done their research and are willing to invest to improve safety, with 86% aware of telematics, a high rate use them, and nearly 90% agreeing the benefits outweigh the financial cost.
The survey found that 94% of business owners say telematics helps protect their employees on the road; 91% say telematics has a positive impact on operations. Business owners believe leading causes of accidents to be: driver error 18%; driving under the influence 18%; road conditions 18%; weather-related causes 17%; distracted driving 15%; and vehicle failure 15%.
Frey noted that owners have concerns about how underwriters will get and use data. He explained that there is a growing standardization among telemetric data providers for formats, speeds, and amounts.
He also stressed that as a regulated business, the use of insureds’ data has to be filed with the respective state insurance departments.
Using Telematics to Underwrite Commercial Fleets
Internally, Nationwide is incorporating telematic data into the underwriting process.
“Telematics is not new in fleet operations. But it has never been connected to insurance. The question is how to take the data and do more with it than just offer discounts. As we gather data we can create a driving profile of the fleet that is more granular,” Frey said.
He explained that there has been fairly wide acceptance of telematics in personal auto policies, but for meaningful risk management in vehicle fleets there are nuances that are different from private cars.
A separate survey found that two-thirds of consumers would allow a telematics device to capture their driving behavior if it provided a discount. However only 10% of consumers report actually using one.
“For underwriters, telematics is an opportunity to personalize commercial lines that tend to be commodities,” said Frey.
“We get reports on vehicle and fleet performance, and so do the insureds. The next step is to connect that to loss-control services as a full part of risk management. The idea is to be proactive rather than the way most insurance tends to be reactive.” &