The future of insurance?

Fleet insurance costs have grown dramatically in the past two years with commentators putting the increase typically between 25% and 35%.

In a bid to control costs and offer fleets an opportunity to reduce their premiums, a number of insurance companies have linked up with telematics suppliers to track driver performance.

Some have adopted pay-as-you-drive models; others base premiums on a matrix of driver performance criteria.

Aviva recently launched its second foray into the telematics insurance arena but, where previously it installed the devices itself and collected the data, this time it is allowing fleets to choose which telematics products fit best with their fleet.

“We learned that commercial customers didn’t like having an insurer’s black box in the vehicle and there were also data protection issues,” says Mark Keavney, product development manager at Aviva.

“We want this to be straightforward and simple for the customer. Fleets use telematics for other commercial reasons.”

Telematics can be used with Aviva’s Fleetwise, Fleetwise Skeleton or Fleetwise Self Drive Hire products. At least half the fleet must have telematics units installed and operational.

The technology used must meet a range of minimum requirements, including maximum speed notification when a vehicle exceeds 70mph; the ability to record abnormal acceleration, braking and cornering, as well as the duration and distance of each journey; and the ability to identify both the vehicle and the driver.

If these criteria are met, Aviva will offer a profit share (cashback) at the end of each year of the three-year arrangement, provided the fleet meets its risk management targets.

Targets can be renegotiated each year as part of the annual renewal.

Zurich will also consider offering a discounted rate for fleets using telematics or other risk management services from one of its selected partners, but stresses this is on a case by case basis.

“One of the key areas that can provide tangible benefits which can be clearly evidenced emanates from in-vehicle technology that monitors and reports on driver behaviour in the use of the vehicle, including harsh braking/acceleration/cornering/speeding/lane changing,” says Steve Stock, head of motor insurance at Zurich.

“The data that this type of technology produces will allow fleet managers to develop succinct fleet risk engineering policies and procedures that could lead to reduced cost of risk for their motor fleet exposures.”

The difficulty for insurers so far has been a lack of evidence about the impact of telematics on fleet claims.

Keavney says: “We don’t know exactly how fleets’ claims performance will change through the use of telematics. Some improve, some stay the same and some get worse.”

Peter Millichap, European marketing manager at Navman Wireless, says: “We have done a lot of work with insurers and brokers over the past year. There is interest in both tracking and driver behaviour. Tracking particularly helps against fraudulent claims including personal injuries.

"However, it still comes back to the question of how fast telematics will affect the drivers’ claims history.”

Navman Wireless is working with various brokers and insurers affiliated with Lloyds.

Most insurers are now actively investigating how telematics can help reduce premiums but also reduce their exposure to risk. Driver behaviour profiling is becoming an attractive proposition because it offers insurers the ability to monitor driver risk and reduce it with remedial training.

“The European Court of Justice’s gender ruling in March means that from December 2011, car insurance companies will lose the ability to price differentiate when it comes to gender.

"There is also a possibility that car insurance companies will soon lose the ability to differentiate by age,” says Linden Holliday, CEO of MyDrive Solutions.

“As such, insurers need a different means by which to assess risk and price insurance premiums accordingly, and through the analysis of behavioural data driven by insurance telematics, this has now become entirely possible.”

Holliday argues that although insurers say they want to see telematics solutions, in fact they want driver profiling solutions as driver behaviour has the clearest correlation to the likelihood of collision.