Could ‘insurtech’ help slow the fast-climbing costs of commercial truck insurance?

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Updated Aug 18, 2020
HDVI has created a software-as-a-service product for commercial auto insurance with coverage that includes the full cost of telematics and safety technology.HDVI has created a software-as-a-service product for commercial auto insurance with coverage that includes the full cost of telematics and safety technology.

Motor carriers have seen insurance premiums rise by double digits, but that doesn’t make commercial truck insurance a highly profitable business.

On the contrary, commercial truck insurers have been exiting the market with loss ratios compounding from rising crash rates, delays in first-notice-of-loss reporting, protracted claim settlements and skyrocketing litigation costs.

The FMCSA estimates fleet transportation accidents took more than 2,000 lives and caused $20 billion in financial losses in 2017 alone.

Insurtech comes to trucking

The state of the insurance market for commercial vehicles has made it difficult for fleets to find cost-effective coverage that adds value beyond minimal liability protection.

Motor carriers are “paying a lot of money for insurance and may not be getting as much value out of it as they should due to a lack of innovation,” said Chuck Wallace, co-founder and chief executive of High Definition Vehicle Insurance (HDVI).

Technology and data are available to help address new risks and changing demands, but traditional insurance companies are not taking advantage of it, he explained.

Wallace co-founded HDVI in 2018 with Reid Spitz, a former VC investor in “insurtech” and logistics. The term insurtech is used to describe technology innovations that are being used to squeeze out savings from the traditional insurance model.

Before HDVI, Wallace in 1999 co-founded Esurance, survived the dot-com bubble, and helped build it through significant growth for eight years, with Allstate ultimately buying Esurance in 2011 for approximately $1 billion. HDVI has focused on rebuilding commercial truck insurance from the ground up and wrapping it in technology, Wallace explained.

The startup company offers an insurance product to small and medium-sized fleets of between five and 150 trucks that comes with an integrated suite of hardware, software and services that fleets can use to manage their safety, compliance and operations.

The product covers the full cost of ELD, telematics and video safety products from companies such as Samsara, KeepTruckin, SmartDrive and Lytx. Besides paying for the technology, HDVI coverage offers more protection and service at the same or better price than traditional policies, he said.

HDVI has integrations with video telematics systems, like SmartDrive, to help fleets manage risk.HDVI has integrations with video telematics systems, like SmartDrive, to help fleets manage risk.

HDVI’s cloud-based software integrates with the third-party telematics systems to extract data and provide fleets with software-as-a-service and human support, he said. If a fleet already has a telematics or video-based safety system, HDVI can work with its current provider to integrate the data into its systems and cover the ongoing cost.

The company determines insurance premiums on an annual basis but its fleet customers can qualify for discounts monthly based on safety results, Wallace explained.

A new round of investment

HDVI began to write commercial insurance policies last September and currently has licenses in Tennessee and Alabama. It plans to expand its footprint this year in the Midwest, assisted by a round of $16 million in Series A funding led by 8VC and Munich Re Ventures.

Qualcomm Ventures and Autotech Ventures also participated in the funding round. Collectively the investors represent freight and logistics, insurance and the mobility industry.

Munich Re Ventures is the strategic corporate venture capital group of Munich Re, one of the world’s largest reinsurance companies, with customers that include well-known brands in personal auto and homeowners insurance.

Amir Kabir, investment principal of Munich Re Ventures’ mobility and “insurtech” investment team, said that telematics and other technologies will continue to change the way commercial auto insurance companies write policies and create value for their customers.

He notes that HDVI has a unique position in commercial truck insurance with its ability to do predictive risk modeling, loss prevention training and technology-based claims management.

After expanding in the Midwest using a retail agent-based distribution model, Wallace said HDVI plans to rollout nationwide and go downstream to owner-operators and upstream to larger fleets.

Chattanooga, Tennessee-based Reliance Partners is one of the largest retail brokers in the nation. Chief Executive Andrew Ladebauche said the company represents HDVI and more than 50 other insurance companies.

“HDVI could really make some headway,” he said. “It is kind of refreshing to have some people come in with outside-the-box thinking and figure out a way to save carriers money. I think a lot of insurance companies will have to play catch up.”

Ladebauche believes that HDVI is one of the first to sell an insurance product that includes the cost of ELD, telematics and fleet safety systems. Reliance Partners has sold HDVI policies to a few trucking companies and all have been “extremely happy” with the product, he said.

HDVI’s technology and insurance model creates transparency between fleets and the insurer, he said. Reliance Partners and other agents will also have visibility to pertinent telematics data to help their fleet customers understand risk exposure and how to lower it to positively impact insurance costs and business profitability, he said.

Ladebauche believes the time is right for “insurtech” companies like HDVI to enter the market as traditional insurers are leaving.

“If you come to the market with a new product, there is not a better time than when people are trying to find a solution to an issue,” he said. “People are going to be open minded right now.”

Samsara partners with Nationwide

Other insurance companies in the commercial truck sector see the value in their clients using the latest telematics and safety technologies. As one of the largest insurance and financial service providers in the U.S., Nationwide is now providing a subsidy to eligible fleet insureds who install Samsara telematics systems and meet safety-focused key performance indicators.

Additionally, Samsara has created a dedicated team to focus on overall customer success and said that Nationwide insureds will receive strategic product implementation consultation to support the investment.