Changing the face of insurance

Telematics-based insurance is the future for fleets with the in-car technology seen as a vital link between safer driving and reducing insurance premiums.

Britain’s biggest fleet insurer, Norwich Union, launched fleet insurance using telematics devices with Fleetwise Care, which was unveiled late last year. The ‘black box’ move into the fleet market followed the launch of ‘Pay As You Drive’ telematics-based insurance packages to young drivers aged 18 to 23, and one for motorists aged 24 to 65.

Meanwhile, Buckinghamshire-based insurance brokers Lloyd Latchford has unveiled ‘Pay How You Drive’ insurance, which is underwritten by two of Europe’s largest insurers Zurich and Royal & SunAlliance.

Fitted

In both cases fleet vehicles are fitted with ‘black boxes’ that record a variety of data. The information, which is automatically captured for analysis and transmitted via GPS, allows insurers and fleet managers to asses driving performance and suggest modification if needed via bespoke driver training.

In the long term, this can lead to reduced accident costs and claims and the potential for a ‘profit-share’ rebate on the insurance premiums through the demonstration of effective risk management, of up to 15%, according to both Norwich Union and Lloyd Latchford. The broker says such returns would be in addition to upfront savings of about 20% on insurance premiums.

Lloyd Latchford says its ‘black box’ technology, developed in partnership with telematics company Airmax, differs from previous systems supplying ‘location, speed and time of day only’ in its ability to record and build up a driver profi le on driver behaviour such as rapid acceleration and harsh braking, overall mileage and speed, and infringements of the European Working Time Directive related to driver hours. Airmax has telemetry systems installed in more than 10,000 vehicles, monitoring some 100 million driver miles per year.

Tim Hutton, commercial director of Lloyd Latchford, said: “Telematics-based insurance will radically change the way that insurance premiums are applied to commercial fleets.

“By applying key performance indicators to driving style, the industry can make vital risk management assessments on drivers and fleets.

This allows us to set up incentive programmes, which will reward safer driving fleets or in the case of poor driving performance institute remedial training and premium penalties.

“For the first time, a mechanism exists to accurately assess the safety and risk potential within fleets and consequently incentivise the adoption of safer driving.”

Shared

It’s a view shared by Douglas Vallgren, proposition manager within Norwich Union’s telematics insurance team, who said: “I don’t think that telematics will completely replace premiums because it is a matter of choice, but telematics-based insurance is a major feature for the future both for fleets and private vehicle owners. I think we will see different products launched to meet different customer demands – a bit like we have seen with mobile phone tariffs.

“There has been great demand for Fleetwise Care. We have been quite surprised at the eclectic mix of companies taking on board the message since launch including large and small companies across a wide range of market segments.

“We are not just moving existing customers from traditional fleet insurance, but we have attracted a lot of new customers because of the product.”

Meanwhile, Mr Hutton says the brokerage is in talks with a number of organisations, including some of the UK’s largest contract hire and leasing companies, who are interested in offering a telematics-based insurance option to fleet customers.

How the cost of the ‘black boxes’ and the communications package is charged varies across organisations – Norwich Union supplies free telematic devices which feed data to the company via satellite. Regular management reports then highlight action areas to reduce crash risk and ultimately reduce insurance premiums.

Fixes

The insurance giant fixes premiums for two years and if, acting on the data recorded by the ‘black box’, a company’s crash frequency and overall cost of claims reduces a rebate averaging around 15% can be expected.

Mr Hutton said: “Telematics insurance is a niche product at the moment but it is the future. I expect it to take off in the fleet sector by the end of this year. A box and the communications package presently costs £70- £80. In a marketplace in which customers will change insurers for £10 that is a lot of money to swallow.

“However, companies that have occupational road risk management at their heart will fund that cost because the benefits are huge. They will not only save on insurance premiums but they will be able to monitor much more closely both their company vehicles and their drivers.

“As demand for telematics-based insurance increases the cost will reduce. The technology will also enable brokers and insurers to cherrypick their customers. We will be able to target the companies which are a better risk and they will benefit from discounted insurance.”

Calculates

Mr Hutton calculates that a fleet with annual insurance premiums of £100,000 could save £15,000-£20,000 in premiums and then a further 15% after 12 months by using the data transmitted via ‘black boxes’ pro-actively.

John Briggs, motor manager for Zurich’s UK Commercial business, said: “This initiative compliments our long standing approach to encouraging risk management within fleets and will provide a richer source of information on the driver, vehicle, its use and how it is being driven.

Active

“Ultimately, we know that businesses who have an active and progressive approach to managing risk will use this enhanced data to positively impact their claims record and better able to manage the cost of their insurance.”

It’s a view shared by Graham Johnston, commercial motor underwriting director at Royal & SunAlliance, who said: “By utilising this technology fleet managers will be able to see the benefits of implementing an effective risk management programme.

“As well as managing the driver risks more efficiently, this can not only help companies meet their ‘duty of care’ requirements but could see fewer accidents and subsequently, lower operating costs.”

Norwich Union says analysis of the information provided by the Trafficmastersourced ‘black box’ and transmitted via GPS will ‘help fleet managers to identify where the potential risks are in their fl eet, review individuals’ driving performance, develop ways of improving overall risk management to enable them to comply with their duty of care responsibility thus keeping vehicles on the road and their drivers safe’.

The Norwich Union technology records similar data to the Lloyd Latchford system, and Mr Vallgren singled out driver fatigue as a major issue that could be tackled using the telematics data.

“Fleet operators have information on a vehicle-byvehicle basis and can therefore identify individual drivers to help improve their road safety. The information gives power to fleet operators and company directors to educate their workforce, particularly in relation to taking two hour breaks while driving,” he said.

Mark Hynes, director of trading at Norwich Union, said: “Regardless of how well fleet managers think they know their drivers, they can’t be everywhere at once. And with almost a third of UK road deaths involving company car drivers, they clearly need to know what their drivers are doing behind the wheel.

Harm

“Businesses have a duty of care responsibility under the law to protect others from harm, which includes managing the safety and welfare of their drivers.

“The duty of care reports will give the fleet operator a window on this previously ‘unknown’ information, leading to a meaningful conversation with their drivers where specific instances have been pinpointed based on information provided.”

Fleetwise Care also provides risk management advice from Norwich Union.

This involves dedicated risk advisers working both on-site and via telephone to help companies minimise potential problems. In addition, fleet managers can use Norwich Union’s online Roadsense risk management tool kit, which gives expertise and guidance and a range of usable documents aimed at the three key risk management areas of the driver, vehicle and journey.

In the future, black boxes could be fi tted to vehicles if the Government and local authorities introduce road pricing schemes. Charges would be levied as a result of telemetry units recording journey data.

Case study 1

The a2om academy, which bills itself as the ‘Oxford or Cambridge’ of driving education, has equipped its fleet of tutor cars with telematics units and is recommending the technology to young drivers.

The ‘black boxes’ are being fitted to the London-based company’s expanding feet of 20 Audi A3 and BMW 1-Series cars and are viewed as both a fleet management and driver training aid as a2om defines the characteristics of good driving.

The ‘Pay How You Drive’ technology will also be recommended to students as they pass their driving test following a2om academy training (RoadSafe: spring 2007).

Academy managing director Gary Austin said: “Boxes are being put into cars for our tutors and can be fi tted by Airmax into a very wide range of cars that students will want access to. If a student has a ‘box’ fitted then we will monitor their driving performance without having to be in the car once they have passed.

“The monitoring of new drivers is important because the first 500 miles they drive are so dangerous. We can prevent high speeding or harsh acceleration or braking by providing feedback to them and their parents on regular basis. It is crucial for young drivers that they always have ‘someone’ with them even if it is virtually.”

Road crashes are the single biggest killer of young people in the UK with almost 1,200 young drivers killed or seriously injured on the roads every year.

Case study 2

London-based ecofriendly private hire taxi company Greentomatocars insures its entire fleet of 43 hybrid Toyota Prius cars using ‘Pay How You Drive’.

The organisation, which this year won an Observer newspaper and Department for Transport-sponsored ‘Fleet Hero Award’ for its ‘green’ focus, turned to the telematics-based insurance scheme earlier this year.

The scheme resulted in an immediate reduction of around 23% in fleet insurance premiums and, says the company, is in keeping with its policy of encouraging a safer, more energy efficient driving style by its drivers.

In addition to the initial savings on premiums, Greentomatocars can also gain a further 15% premium refund based on claims-based profit sharing with the scheme’s promoter, specialist insurance broker Lloyd Latchford.

Founder of Greentomatocars, Tom Pakenham, said: “As well as the fi nancial incentive that ‘Pay How You Drive’ holds out, we were attracted to the telematics monitoring aspect for quality control and vehicle management reasons.

“The private hire industry is notorious as one in which operators struggle to monitor the performance of their drivers and have a real time awareness of vehicle condition and mileage. It is early days but we are excited and optimistic about the potential of our telematics options to build a streamlined, industry leading business.”

<< Back to contents page

• < previous article
• |
• next article >