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Measuring the Right Data… Driver Behavior and Risk Assessment

Today, everyone knows that it’s important to measure what you manage and manage what you measure. That’s great, but let’s consider this… what if you’re measuring the wrong data? Or at the very least, measuring data that does not truly give you the accuracy you think you’re getting? More to come…

When GPS first was introduced to the mainstream commercial markets it was wonderful. Companies for the first time could see their field assets locations. They were empowered! Now what? Knowing where your assets was great, but then came the next level of questions… “What do I do with that data?” And so it began, the evolution of today’s modern fleet management systems and other similar telematics enabled services. We are now seeing the forward progress move into virtually every vehicle, device, and even pet.

Now, let’s consider the first paragraph again, measuring and managing. The topic is about driver behavior, safety, and risk assessment / mitigation. Today’s fleet management and telematics programs deliver a tremendous amount of value to every business that deploys them. It’s become critical to have one in order to maintain maximum productivity and to stay ahead of competitors. One of the functions many systems have today is ‘Event Based’ tracking of driver behavior. This enables a fleet supervisor or other key member evaluate, both in real-time or after the fact, how many times a driver performed a harsh-braking maneuver, or harsh acceleration, or aggressive turn. And this is good… sort of. Events give you only a sliver of information that an event occurred. But what it doesn’t tell you is anything about the event itself, if it was a severe or very minor event, or the duration of the event. Also, what event based systems don’t tell you is how the driver performs when there are no events. The assumption is that they drive well, but how well? How do they compare to the other drivers in the fleet? You can start to see that measuring and managing those ‘events’ can possibly be an exercise in measuring data that does not really tell you the true or accurate story. It’s like measuring birthdays. It’s great to know you had 50 of them, but which party was the best, or worst? How well did they live each year between birthdays? Knowing the count doesn’t really tell you the real story.

With the evolution of technology so comes the promise of newer and better software and resulting data. We’ve all been witness to newer, better, faster, unique applications on the market. Just look at your hand-held device. Because we’ve measured things one way before doesn’t mean we have to keep doing it the same way if there is something better and available. Many are aware of the UBI Insurance programs that are offered to individual consumers today. Put in an OBD device in your car and let the insurance company get information about how you drive. Only problem is that it’s self-selective, meaning only the good drivers are opting in due to the potential discount via some type of ‘loyalty program.’ In general, they only measure how many miles are driven, time of day, and maybe speed. The movement afoot is to further the evolution of UBI to what we are calling RBI, Risk Based Insurance. With the further advent of very detailed and accurate driver behavior software, being able to assess risk takes on a whole new meaning for both fleets and insurers.

Specialty fleet insurers are showing genuine interest at the prospect of having driver scoring software that provides them with details that are expressly related to driver behavior and potential risk assessment. There have been significant discussions regarding their interest in potential cost sharing, which often times can cover much, if not all, of the cost for the entire program. Consider that the cost of insurance premiums for a fleet driver potentially being on the magnitude of 2-3x or more on a yearly basis when compared to the average consumer, especially since the cost of claims can proportionally much higher. Not to mention fleet vehicles can be much more expensive to fix after being in an accident. In addition to all of this there may be a reduction in maintenance related costs for vehicles driven by better drivers, as well as a reduction in the overall fuel expenses. Add all that up and you have much more of a reason for fleets to invest in understanding and improving their driver behavior. When you combine a new driver scoring model along with the proper driver training and improvement programs you get a very sophisticated and effective way to safeguard your drivers, your vehicles, and corporate assets. If you’re going to invest your time managing metrics related to your driver’s performance make sure you are not measuring just a very small slice of the overall picture. Much like a puzzle, one piece doesn’t show you the full picture.

Why UBI Is a Compelling Proposition for Commercial Fleet Insurance

The right approach to telematics and usage-based auto insurance continues to be debated in the personal lines realm, but the value proposition—and the business opportunity—is clear for commercial fleet insurance. By combining telematics, behavioral metrics, driver risk scoring, contextual data and video systems, insurers can build the next generation of insurance solutions for commercial fleets.

Fleet Insurers have been collecting the same old data, a five-year claims history and reported miles, to determine risk and renewal strategies. There is a strong desire to elevate the renewal process with more accurate means of underwriting risk assessment. Forward-looking Fleet Insurers need to assess their current business models in light of a more sophisticated risk-model emerging through the use of analytics applied to telematics-generated data.

Building a Case for UBI in Commercial Lines

Telematics based services are rapidly expanding beyond standard operational services to also cover more behavioral aspects. This enables fleets and insurance companies to gain a deeper insight into both very tangible and less tangible areas that have a significant price tag associated.

With a strong correlating driver risk identification system in place, fleets and insurance companies can gain valuable insight that will assist in accurate policy pricing, targeted coaching of poor driving behaviors and identification of employee behaviors that have a negative impact.

A Complete Picture of the Fleet Performance

The driver risk score should ideally be combined with other contextual data related to native vehicle risk, typical vehicle routes, weather and other environmental conditions. With all of those parameters known, the insurance company will have a complete picture of the fleet performance enabling a very accurate policy pricing that goes well beyond traditional 5-year loss history as the main indicator.

The contextual data elements are very difficult to modify by the fleet. They can buy modern and safer vehicles, and they can optimize the routes to minimize high risk locations, but those come at an operational cost. However, once the fleet gains insight into the individual drivers detailed behavior, they have an opportunity to instigate targeted coaching for drivers that have the highest risk. Because the monitoring systems are so accurate, the efficacy of the coaching can easily be monitored and appropriate HR actions taken if negative behavior is persistent. Since the at-fault accidents are occurring within a small group of drivers, and those drivers can be identified, the fleet can actively drive towards a better overall fleet score and hence lower insurance premiums.

New indicators also suggest that drivers identified with erratic driving behavior will have a tendency to carry that erratic behavior into other work related behaviors, so effectively the fleet management will have an additional tool for employee performance which leads to improved customer satisfaction and more efficient business operations.

A New Era for UBI

The driver behavior data is collected from standard telematics devices that are already installed or are installed specifically for this purpose. The additional cost to collect the driver behavior data and GPS for contextual data is a small increment over standard GPS tracking solutions; however, the potential gain is significant. Currently, there is some disparity in how data is collected; however, there are industry-wide efforts ongoing that will standardize the raw data collection used for scoring. Once uniform data collection is enabled, most existing telematics devices can be easily upgraded to provide scoreable data. One could argue that this enablement will kick-start the migration to commercial UBI. The barrier to entry is lower for commercial lines than personal lines, and the ongoing operational costs will be lower due to the data sharing with traditional telematics systems.

The combined driver behavior data and contextual data effectively bring a new era to UBI. Traditional UBI is predominately about how many miles a vehicle drives and very little about how those miles are driven. With better risk insight the program can appropriately be called Risk Based Insurance—RBI. We will know how many miles were driven and we know which risk each of those miles carried. Hence the underwriting accuracy vastly improves.

(Related: Does Smart Phone-Based UBI Adequately Assess Driver Risk?)

When fleets are equipped with coaching tools that can accurately address driver deficiencies, they are able to further influence the inherent risk of operating a fleet of vehicles.

The early adopters among the insurance companies stand to gain a significant underwriting advantage and it is entirely possibly that we will see new programs closer aligned with personal lines pay-as-you-drive programs, but specifically targeted for fleets where the price elasticity would be driven more by actual present risk, rather than by miles. There is a strong demand for more granular knowledge prior to the underwriting phase. If fleets had a tool to improve driver behavior, and could document it through a reliable real-time score, insurance companies would reward that.

Video-Based Systems

Fleets carrying passengers have traditionally been leaning towards video based systems because they are very efficient in accident reconstruction and claims settlement. Those video systems have also been used for driver behavior monitoring. In general they work quite well, but are by nature event-based systems and really only target the top 10 percent of poor drivers. The rest of the drivers ‘fly under the radar.’ A more elegant system would be one that combines the best of the two worlds: accurate driver scoring of the entire population and continuous video recording for liability purposes. In recent years, advanced vehicle motion analytics effortlessly pinpoint the most critical clips without ever looking at a single video clip. There are a plethora of low-cost continuous video recorders brought to the market. Combine those with a telematics solution and you have a low cost solution with all the benefits.

With new analytics solutions, more commercial lines insurance companies can take advantage of installed and future telematics devices to collect a comprehensive data set driving towards a full risk-supported UBI program with minimum incremental cost.

Posted on: https://iireporter.com/why-ubi-is-a-compelling-proposition-for-commercial-fleet-insurance/