How telematics data is reducing driver risk and insurance premiums

Unsurprisingly, employing drivers is a risky business. Not only to the vehicle, the driver, and the company itself, but insurance providers, agents and brokers, as well. Federal regulations require commercial vehicles over 10,000 pounds to carry $750,000 in insurance coverage. However, even with proper coverage, a company’s liability for an employee’s mistake — negligent entrustment — places an immense burden of responsibility on the insured — and by proxy, the insurer.

The doctrine of respondent superior states that liability is determined to be of the employer if they are indirectly responsible for employee behavior deemed negligent. In the face of accident litigation, employers need to be able to prove that they take meaningful steps to recognize and deter unsafe driving and evaluate potential road risks. Luckily, 2019 has ushered in a new wave of innovative, vision-based telematics technology solutions that are helping fleet managers and insurance agents monitor and reduce risky driver behavior and protect against negligent entrustment. With the use of next-generation GPS technology to identify risks and unsafe behavior, and artificial intelligence (AI) to detect the situation surrounding the accident, companies ensure that every proactive step is taken to protect themselves from negligent entrustment.

Proactive risk assessment

No business wants their drivers to be put in harm’s way on the road, but safety also makes good business sense. Enforcing a business safety culture ultimately reduces costs associated with insurance claims, legal expenses, and fines and repairs in the event of a collision. Beyond obvious hardware and physical implications, accidents stand to place primary financial liability on a business should its drivers be deemed the responsible party.

The first step in mitigating this risk is catching and cutting off unsafe driving behavior before it causes an accident. Data gathered on driver speed, harsh braking, rapid acceleration, driver drowsiness and more allows employers to record incidents, intervene in unsafe driving conditions and train their employees to practice safer habits. Alert and knowledgeable employees prove to be more attentive and prepared on the road, decreasing accidents and liabilities for a business. When used in conjunction with conventional underwriting elements, this advanced driving performance data can generate more accurate pricing models, which align to a driver’s susceptibility to various risks and can be refined over the life of a commercial insurance policy.

Eases policy management challenges

One of the leading challenges organizations face without GPS tracking systems is a lack of driver accountability. Prior to — and in an effort to avoid — the point of having to determine accident liability, drivers hold multiple points of responsibility within their job description. Without automated diagnostic and vehicle condition information, the responsibility falls on the employee to tell their employer when a maintenance light turns on in a vehicle making it unsafe to drive. If a maintenance issue goes unaddressed and leads to an incident, odds are the company will be held responsible and the insurance provider financially liable.

Another challenge before this technology was released was the lack of visibility into vehicle locations. Fleet managers were completely in the dark, unable to track vehicles and equipment in real-time. If equipment was stolen or damaged, companies had no way to find and repair it. Now, fleet managers can monitor vehicle location and track insights that can solve significant fleet management challenges and lower the chance of claims due to vehicle theft, improper maintenance or misuse of vehicles.

Protects the bottom line

If a company self-insures its vehicles, which is a common practice, then it is likely paying accident-related costs directly. Fatal and non-fatal accidents alike are costly in many ways. On average, each loss-related accident will cost a company $70,000. Other costs to consider include property damage incurred, vehicle downtime that leads to the loss of productivity and revenue, and any claims made by a third-party.

A report from the U.S. Bureau of Labor Statistics revealed that approximately 40% of motor vehicle accidents are work-related and cost employers over $56 billion a year. Not only does real-time telematics enhance driver safety, but it also gives weight to the claim that a company’s drivers are “safe,” making premium cuts and discounts from commercial auto insurers more likely. On average, companies using telematics to monitor driver behavior receive a 5-15% discount.

The most common safety issue companies face is speeding violations and tickets. It endangers not only company drivers and those around them, but it also brings poor publicity to the company’s brand, which can negatively impact its bottom line. Companies decide to implement a telematics system to help solve this business challenge because doing something as simple and easy as setting up speeding alerts can dramatically decrease how frequently accidents occur.

The technology outlined above allows for real-time risk management, which effectively reshapes the pattern of engagement between insurers and their customers. Each one of these challenges can have a significant impact on a business and its profitability. However, companies are increasingly starting to recognize the consequences that murky visibility and purely reactive problem-solving bring.

It’s important for businesses to connect the data from a telematics system with their overall business strategy. Failing to harness the power of artificial intelligence and machine learning to draw conclusions about driving behavior runs the risk of dragging a company into an insurance nightmare.

Related: 

• How mobility data is driving the future of transportation
• The evolution of data and automation in auto claims
• By the numbers: How technology is reshaping auto claims

Ryan Driscoll (ryan.driscoll@gpsinsight.com) is the vice president of marketing at GPS Insight. The views expressed here are the author’s own.