Since each insurer's pricing algorithm is unique, they typically target specific vehicle classes, geographies and business classes to expand, subject to a targeted measure of profitability. Meeting these business objectives is possible through risk pre-selection. (Photo: Diego M. Radzinschi/ALM)
Innovation in both product and distribution underlies the strength of successful insurance programs, and commercial auto insurers have an opportunity to leverage both as the industry seeks to improve upon a decade of financial losses. While the use of telematics-based products increases, most insurers adopting them remain committed to traditional distribution methods and overlook the substantial benefit of risk pre-selection.
Commercial auto is the worst-performing property and casualty line of business, and telematics is a very necessary solution for advancing risk assessment and future profitability. Since 2010, the industry has generated an underwriting return only once, in 2021, due to a marked decline in frequency associated with the Covid-19 pandemic. As such, an increasing number of insurers are transitioning to telematics-based programs based on quantified improvements in crash frequency, loss ratio, retention, claim quality and efficiency. The IoT Insurance Observatory is a leading advocate for telematics solutions in both personal and commercial lines and reports many of these results.
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