Insurance crisis fueling demand for data-driven solutions

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Updated Apr 8, 2020
Video systems, such as this system from Verizon Connect, capture video and data for review by fleet operators to lower claims costs. Some insurance companies offer discounts for the use of technology.Video systems, such as this system from Verizon Connect, capture video and data for review by fleet operators to lower claims costs. Some insurance companies offer discounts for the use of technology.

The National Highway Traffic Safety Administration’s most recent crash statistics show that 12.5% more people were involved in large truck accidents in 2018 than 2017. Litigation costs for truck accidents have soared as well, as have the number of judgements in excess of $10 million.

These trendlines could cause insurance costs to reach a tipping point in 2020, with some experts predicting policy premiums will increase 20% to 25% this year.

A silver lining to the insurance crisis, however, is that skyrocketing costs are causing insurance companies to work more closely with motor carriers and technology providers to find creative solutions.

The first line of defense

Motor carriers that use video telematics systems to identify, assess and reduce risky driving behaviors have a protective layer from accident costs. The technology can instantly retrieve video and data from accidents to prevent false claims and to expedite settlements when the evidence shows liability.

“Video tells the real story,” said Jim Angel, Trimble Transportation’s vice president of video intelligence solutions.

Video telematics platforms that score driving behaviors also show how fleets are trending with crash risk. A metric in Trimble’s platform, for instance, tracks the number of miles between risky events such as hard braking, swerving and speeding.

Fleets that show a sustained increase in miles between risky events can gain better negotiating leverage with insurance companies, Angel said.

Insurers also can use video telematics data from fleets to accurately price their policies and offer discounts, but this is not an easy process. Insurers have to file rate structures and policy discounts with state regulatory agencies. The telematics data they get from motor carriers does not come from a central clearinghouse and have uniform data standards they can use to uniformly assess risk and price policies.

Another obstacle for insurers is that agents who sell policies may hesitate to ask for telematics data from fleets. This might complicate the sales process for agents who want to quickly provide rate quotes and close deals, said Chris Carver, vice president of insurance services for SpeedGauge.

Sharing telematics data

To assess risk and underwrite policies, insurance companies mostly rely on public safety data from the Federal Motor Carrier Safety Administration. In a perfect world, they would use telematics data to assess the actual geographical driving exposure that fleets have — the roads they travel, by the time of day, and driving behaviors, said Mike Schliesmann, vice president of product and strategy for Protective Insurance.

Protective Insurance may offer an up-front policy discount to fleets who share historical telematics data.Protective Insurance may offer an up-front policy discount to fleets who share historical telematics data.

For this to happen, insurers would need GPS and behavioral data from a large set of carriers. With a large dataset, insurers could predict the cost of claims for any given fleet by comparing its routes and driving behaviors to similar fleets that operate in the same corridors, he said, and to their historical claims costs.

This scenario may yet be five to 10 years away, he said, but the momentum is picking up. More fleets are willing to share their GPS and telematics data to achieve cost savings.

Protective Insurance may offer an up-front policy discount to fleets who share historical telematics data, Schliesmann said. If the data shows a fleet’s safety trends are moving in the right direction, its public safety data and accident claims over the last three to five years should reflect that.

“There is a story about the future we are buying into, but we want to validate that it’s not just luck,” he said.

Pay-as-you-go insurance

New developments in the insurance industry are giving motor carriers a chance to prove their safety credentials by using telematics data and qualify for discounts after a trial period. SpeedGauge recently launched such a program called Gauge My Fleet that is being used by insurance companies to offer pay-as-you-go policies.

SpeedGauge has integrations with more than 100 telematics vendors, which provide its fleet customers a Safety Center platform to track and manage vehicle speed trends and driver behaviors.

The Gauge My Fleet program combines GPS and driver speed data with the characteristics of a fleet’s operating profile to calculate a FAIR score to assess risk. The FAIR score uses the same scale as a credit score (300 to 850).

Using the FAIR score, an insurance company is able to provide fleets with a rate for a policy and then require the fleet to reach a certain score after a 90-day period to keep that rate and quality for discounts.

SpeedGauge provides fleets with coaching to help them attain the scores, Carver said. If the carrier falls below a minimum FAIR score during the trial period, the insurer could require a fleet to use video event recorders to keep the policy going forward.

Insurance companies that use telematics data are not just looking in the rearview mirror at a carrier’s loss history anymore. “They are starting to look out the windscreen,” Carver said, and are finding creative solutions for the insurance crisis.