INSURANCE TELEMATICS FOR COMMERCIAL FLEETS: MAKE IT SIMPLE

M2MAPPS: Insurance telematics (UBI) for commercial fleets is a very new area. There are globally approximately 4.6 million vehicles and owners that use some sort of an insurance telematics solution, but not so many in the commercial fleets. Can you talk about what can be done to make UBI more attractive to fleet customers?

CHRISTOPHER CARVER: There are two points. First, the programs really need to be simple. They have to be easy to implement. Complex systems and processes get in the way of doing business, they make adoption more difficult, they reduce the likelihood that the telematics are going to be used. Second, the benefits of the insurance telematics programs have to go beyond just premium discounts. We can document productivity and efficiency improvements, fuel savings. There have been numerous studies on emissions reductions and also improvements in regulation compliance, driver and passenger safety. All of these create reductions in collisions, and they reduce the claims costs. Find out more from Chris at Telematics for Fleet Management USA 2013 (nov 20-21, Atlanta): http://www.telematicsupdate.com/fleet

M2MAPPS: Would offering a free telematics device and service to insurance consumers actually help grow the market? Or are there other things we need to be thinking about?

CHRISTOPHER CARVER: Offering free devices and service has been used in personal lines, mostly on a temporary basis, to establish a baseline of data for ratings. The commercial space is different. The business user requires a more robust solution. Typically, these systems provide a wide range of benefits – insurance savings is just one of them. They’ve got [to have] documented ROIs. Every customer wants to talk to their telematics sales person about the return on investment because [these systems] cost money. So, it’s not a common practice for insurance carriers to subsidize the fleet devices.

M2MAPPS: How important is the premium discount to the growth of insurance telematics?

CHRISTOPHER CARVER: It’s a great question because it’s always on the CFO’s mind when they are looking at a fleet management system. But from the insurance carrier’s perspective, we really caution the telematics vendors to be very careful about how they present it. It’s part of the whole package. … They need to be extremely careful because the reality is each policy is underwritten and rated based on a wide variety of factors. Having a telematics device may not necessarily result in lower premiums, initially. However, I think the indications are out there, and I think the reason we are having this conversation is that, over overtime, we can demonstrate reductions in collisions and losses, and that may earn a client a premium reduction.

M2MAPPS: Are there specific technologies or products that would actually make a difference in helping insurance companies offer greater discounts? Things like real-time driver feedback mechanisms, these types of solutions?

CHRISTOPHER CARVER: There are some great technologies out there, and there are new technologies coming into the market every day. But the whole area of discounts is a complex web. … Unlike in Europe, in this country, each state has its own insurance regulations and its own requirements. Insurance rates, therefore, are filed in each and every state where the carrier does business. And some may recognize driver feedback as a legitimate mechanism for reducing the rate in concert with improved driver behavior. But there is some debate as to whether instant feedback itself and the improvement in driver behavior is the right way to go. If you give instant feedback for driving skills, that could [also] be a distraction. So, when we look at the technologies in general – although there are lots of good examples – I think the insurance companies are still trying to work out which are the best mechanisms for improving the driving behavior, and what mechanisms will ultimately lead to real-time driver improvement. Chris Carver will be talking about this in much more depth in Atlanta this November: http://www.telematicsupdate.com/fleet

M2MAPPS: Now, Liberty Mutual has been offering insurance telematics for several years. How many years has it been?

CHRISTOPHER CARVER: We have been in the commercial side for a little over three years now.

M2MAPPS: So, clearly, there are some lessons that you have learned about growing the market. Could you share some of those with us?

CHRISTOPHER CARVER: It’s really about simplicity. We need a simple message because the use of telematics among small and mid-sized fleets is relatively low. Part of the reason for this is the lack of general awareness of our products and products in general. Another is the cost of deploying and managing the capabilities of telematics, especially for the purposes beyond insurance. Conversely, many of the large fleets are actively using telematics and managing their fleet logistics, and they have done so for a number of years. We have customers who have used telematics as far back as the late 80s. Our job remains and has been to educate them all. The fleet owners need to understand the benefits. It may seem obvious now, but we did not anticipate how deeply the fears would be around us using the telematics to deny a claim. We are not going to deny a claim. We are going to use it to credit them, not debit them.

M2MAPPS: Is there a typical discount that you are see yourself offering to fleet customers?

CHRISTOPHER CARVER: There isn’t a typical discount because, especially with a larger fleet, every fleet is different, and every fleet is managed differently. And the rates and the discounts are filed with the insurance regulators in each state. But, in general, I can say this: Our programs range from a 15% discount in the first year, in some states, to further discounts in subsequent years, based on how the safety record has improved or [how] the losses have been reduced.

M2MAPPS: You have mentioned simplicity several times, and I am wondering how big of a challenge it is because insurance telematics is a complex solution by its definition.

CHRISTOPHER CARVER: The one-word answer to how to get telematics and insurance moving in the commercial sector is simplicity. The offers out there today, including our own, are too complicated. It derails the initial sale of telematics to bring up insurance. The primary focus of our Onboard Advisor program has been for small to medium-size fleets, and we have tried to be very simple about that offer. If a client is eligible, then they immediately know their discount. It’s 15% in year one. But that requires an eligible business. I have to be really clear about that. Also, we file these across the country, but only certain states adopt them. It’s currently only available in 15 states. Now, year two is where things get better, [but] the discount is up to them. It’s up to the policy holder, the insured, what they can do in terms of improvement. … That’s where we try to give them as much advice and as many tips as we can, so that they can prove their fleet reduced their at-risk driving and increase their discount.

Company: Liberty Mutual

Christopher Carver, program manager for commercial insurance telematics, Liberty Mutual, on the need for simplicity when selling insurance telematics to commercial fleets.
In this podcast with Telematics Update’s Jan Stojaspal, Christopher Carver, program manager for commercial insurance telematics, Liberty Mutual, talks about the need for simplicity and the importance of premium discounts when selling insurance telematics to commercial fleets.

This interview has been conducted in association with Telematics for Fleet Management USA 2013 (November 20-21, Atlanta, GA). Chris will also be sharing further insights at the conference: http://www.telematicsupdate.com/fleet

Carver has been active in telematics for nearly 20 years. Early in his career, he was responsible for a range of industry-leading products, including a telematics system by Magellan for US Airways Express in 1994. As president of FleetPoint between 2004 and 2009, he gained first-hand experience in the uses of telematics for fleet safety and driver behavior coaching. He joined Liberty Mutual after selling FleetPoint in 2009.
Jan Stojaspal is the editor of Telematics Update.

Learn more about commercial UBI along with many more fleet telematics topics at Telematics for Fleet Management USA 2013: http://www.telematicsupdate.com/fleet

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