Telematics Update's editor, Thomas Hallauer, finds out how the telematics-insurer partnership can make telematics not only palatable, but also downright exciting for the fleet underwriting sector
Among the growing number of telematics products aiming at partnering with insurers, we’ve seen a lot of over-complication and over-simplification. The key issues seem to be that not only is the language these industries speak different, but their priorities, age, business models and customer relationships (to name just a few) are barely comparable.
In fact, it’s virtually impossible to find any common ground. How can the insurance sector profit directly from using the telematics data from a FMS system?
Insurance solutions typically sit independently of the insurance company’s back-end. It provides the insurer with a tool that manages the information coming from the fleet managers and their fleet, and enables the insurer to provide a telematics-assisted risk management service.
This not only enables cheap or free track-and-trace as part of the fleet’s insurance premium, it also provides this insurance with a lot of benefits and cost savings. Very little is made of behaviour-monitoring data used in risk management calculation. The core applications are more about new driver in policy update; automatic register of new vehicle in the motor insurance database; linking incidents, claims, checks and repairs; and tracking of the vehicle to protect the insurer against fraud.
For the insurance sector, the key driver for this is the margin they have to play within the motor industry. Fraud is rife, and has been for so long that claiming for whiplash is taken as a given for any kind of accident. Similarly, the seriousness of accidents is very often exaggerated or wrongly communicated between drivers and fleet managers, which leads to baseless claims.
The cost of investigating these claims is huge – one of the biggest money losses in the sector. Claims handlers need to be very thorough, and the more information they have at hand, the better.
The system makes a very clear link between the vehicle, the driver, the fleet manager, the insurer, the broker and even the repair workshop. In the event of an accident, the process of checking the facts with the driver, posting the claim, getting it approved and having the workshop act on it is made seamless, while leaving a detailed information trail and providing enough flexibility for each party to add information to the system.
The system also links to the set of repairers in partnership with the insurer, so the workshop can be selected according to the location of the accident (or other logical criteria). In the end, the winner seems to be the claims handler. It is also particularly useful in a leasing area, where most claims are made just before the end of the lease.
According to Alex Hall, senior consultant at Total Systems, provider of IT services to the insurance sector, this is because a policyholder/client/driver may be charged for any damage to the vehicle on its return to the leasing/hire company at the end of the contract term.
Historically, a disproportionate number of claims are made at the end of the leasing term. This often occurs because "wear and tear" repairs have not been done during the contract period. Therefore, dubious accident claims are made to shift liability of repair costs from the client/driver to the insurer.
By being so attractive to the insurance sector, is the proposition valid enough for the fleet owner? Is there any real advantage to locking your fleet management systems into your fleet insurance, when basic track-and-trace is readily available – and cheap?
According to Alex Hall, building up a detailed picture of information to enable more exact rating, underwriting and risk management, benefits both policyholder and insurer by allowing a better insurance package with more competitive premiums, lower admin costs (e.g. motor insurance database compliance), reduced claims costs and quicker response times.