Commercial auto insurance. A new age of Usage-based insurance
Safety.
According to the Federal Motor Carrier Safety Administration, U.S., nearly 4,440 large trucks and busses had been involved in fatal accidents in 2016, while in total over 475,000 crashes involving large trucks in the year had been reported by the police.
Financial loss.
The above mentioned numbers represent the enormous amounts of insurance claims that may have been registered during the time, indirectly pushing the overall insurance market premiums higher.
Still, a new type of insurance — usage based insurance.
Whenever we talk about usage-based insurance, it’s about how often you use whatever you are insuring. From a standpoint of how often you properly self-report the number of miles you drive and how aggressively you drive, that’s when usage-based technology comes into play by monitoring the driver’s behaviour when operating a vehicle.
To date, usage-based insurance (UBI) is on the rise, and, according to data from Global Market Insights, the commercial side of the UBI market is expected to grow more than 18% by 2024.
Commercial UBI market is expected to grow more than 18% by 2024 — Global Market Insights
Here we distinguish the telematics market, more focused on the fleet management (mainly fuel consumption amnegement) and insurance business. When we talk about insurance business based on telemetrics data, we talk about the risk and the driving pattern profile of the client.
While telematics have been proven a success story for fuel consumption management and a no brainer for fleet management companies, insurnce risk management is still struggling to find its value proposition to the fleets.
Smart and rich data
A report unveiled by U.S. firm Aite Group suggests that about 2.5 million commercial insurance-related telematics devices were present in cars globally by 2017 end, and this number will reach 120 million by 2021. Fleets are significantly benefited by the usage-based insurance market, as they often consist of half a dozen to hundreds of vehicles.
From the insurer’s perspective, the availability of richer, more complete information on commercial vehicles and drivers makes it possible to develop custom policies and programs for commercial fleets including quicker claims resolution. Safe drivers and responsible operations can be rewarded. Risky drivers can be retrained or, if not responsive to training, removed from behind the wheel — before they cause an incident or loss. Risk managers have a depth of data to draw on to help develop policies and set pricing.
Digital native. Continue to excell
Commercial insurance has been a major spending area for not only individual truck owners but also for fleet managers, dealerships and for services like taxi or ride-sharing.
Although tightened rules regarding driver qualification and safety training have lowered the rate of accidents, trucks still contribute a large number to road-related deaths in North America. A US government mandate in the commercial trucking arena to more and more track the driving pattern of the vehicles to reduce road fatalities is making it easier for insurance providers, like Progressive, to implement usage-based insurance (UBI) programs for their typically tech-wary clients. Digital native insurers like Progressive or Metromile have UBI in their DNA and will continue to expand their remits in the area.
The insurance carriers offering UBI gain an opportunity to attract and retain the lower-risk fleet operators by becoming first-to-market leaders. Carriers slow to adopt a telematics program can expect to be left with higher-risk operators. The greater value of commercial insurance telematics, however, is the accrued data that leads to a fuller picture of driving behaviors, risk factors, and operational hazards, all of which can help more accurately price policy premiums to improve profitability.
Big brother is not watching you. Its the driver that is more aware about himself.
As commercial insurance telematics continues to dramatically reshape the insurance sector by delivering profitable growth through unlocking the opportunities that exist within an insurers existing customer base and new market segments, it is also clear that commercial fleet managers no longer view telematics as a big brother technology. Fleet operators now shop for insurance with telematics capabilities. Once fleet operators do opt for a telematics-based insurance solution, insurers tend to have more engagement with the policyholder.
Bobit Business Media, a publisher of Heavy Duty Trucking magazine issued a report on US telematics adoption rates by fleets ranging from 57 percent in the West to 38 percent in the Midwest. Most respondents to the report said that the use of telematics had benefitted their fleet overall, and most also felt that the benefits were better than they expected at the time they implemented the technology.
Digital non-native. What’s the plan?
In recent years, commercial lines insurers have struggled with profitability and experienced the poorest underwriting results in recent memory, prompting the realization that this industry sector needs a better strategy for assessing risk potential. Insurers need a viable data-based mechanisms to help improve driver behavior. According to a 2017 study conducted by Conning, the 2015 loss and combined ratios of 87.7 percent and 108.8 percent exceeded overall commercial lines numbers by 15 points.
In this lively period of transformative change, insurance companies have a tremendous opportunity to go beyond making cautious incremental changes to existing legacy products. Instead, adopting the latest digital solutions geared to customer-centric innovation — enabled by data-driven insights — can re-energize programs, fulfill demanding customer requirements, and establish a stable road map to continuing market success.
Harnessing large volumes of data from real-time sources can help insurers develop new products and refine pricing strategies. When combined with a robust operating strategy, advanced analytics can significantly increase underwriting profitability and provide a valuable market differentiator — EY
Non digital insurers still can bring a UBI solutions with partnering with technology platform developers. Merging technology and business into a partnership where two parties are in charge what they know best. Insurer will always be the best in local market knowledge and user relationship manager. Whereas platform should bring multi usage knowwledge based on data analytics and machine learning algorithms that would create synergical knowlege of loss prevention to the insurer.
About Stemic Drive
Stemic Drive is a next-generation usage-based insurance (UBI) technology platform. We manage the full life cycle of data. From data acquisition to transformation to analytics to insights for predictive insurance dynamic pricing. We are providing a risk score for the driver and fleet. We are targeting insurance companies that want to leap in UBI for their clients. We provide all the toolset and platform to run UBI business smoothly. Visit www.stemicdrive.com
