Telematics is a buzzword in the fleet and insurance industries today. Fleet telematics have changed in the last five years, but the technology is actually decades old. It started on the manufacturing lines of Ford, Chrysler, and General Motors in the 1970s. At that time, telematics was a way of processing orders and creating vehicle reports. Today, the entire transportation industry is catching on to telematics insurance.
What is Telematics?
Telematics is a technology that collects information about your vehicle and your driver’s behavior. This may include:
- Number of miles driven
- HoS (Hours of Service)
- Speed
- Braking
- Sharp turns
- Idle time
- Engine diagnostics
- Mechanical issues
- Accidents
Many telematics systems offer extra features as well, such as route optimization. The technology rests in the category of IoT (Internet of Things) technology. This is also known as machine-to-machine (M2M) communication. The IoT connects endpoints remotely so that two systems may communicate. We see this technology in our homes, our cars, our schools, and our workplaces. In the home, you’ll recognize it as Alexa or Google Voice. Systems may connect to your lights, coffee maker, dishwasher, thermostat and so on. This allows you to control them wirelessly.
Fleet telematics involves no level of vehicle control. Instead, it communicates with your telematics software to record data about your vehicle and driver. But what exactly is insurance telematics? We’ll get into that below.
What is Telematics Insurance?
Telematics insurance, insurance telematics, Pay-as-you-drive, usage-based insurance- it’s all the same. If you’ve seen or heard any of these terms, know that they all fall under the same insurance umbrella. All of these programs tailor premiums to individual driving patterns. This is a contrast to the method of assessing risk based on customer offered information or historic data.
With these programs, drivers or their employers receive incentives for good driving behavior. The incentives are often greater than traditional insurance discounts. This is because insurers can evaluate driving behavior over time. They can then assess risks based on that data. In addition, they can read the data in real-time, and offer discounts in the future based on new data.
All this requires is a telematics device that’s plugged into the vehicle’s onboard diagnostic port (OBD-II) and connects to your insurance company.
How Does Telematics Insurance Work?
Telematics car insurance experts analyze data collected from a telematics device. They search for trends or patterns of behavior, especially dangerous driving behavior. This may include harsh cornering, over-acceleration, hard braking, or speeding. The industry calls this data “demonstrated predictive potential”.
Insurance companies use this data to predict your risk, and therefore your rates. This is miles ahead of the traditional methods of calculating premiums. Before, it was an endless cycle of questions just to get a quote. The use of real-time and trending data simplifies the process. It may eliminate the need for questioning at all.
With the initial use of telematics auto insurance, you'll pay the standard rate at first. After a trial period, which is different for each insurer, the rate changes. In most cases, you’ll benefit from instant savings and your savings are likely to increase over time. State Farm claims that its “Drive Safe and Save” program saves drivers 50%.
Is Telematics Insurance Worth It?
Individualized data-driven insurance is the way of the future. Right now, insurance companies are just catching up to the idea. There are plenty of companies that offer discounts with the use of telematics. In fact, there are even insurance companies that pay you to install telematics devices. This is because they know it lowers your risk, which decreases theirs as well. But the full evidence of the benefits of these programs is only beginning to spread. With that in mind, what are the benefits as we know them today?
Better Driving Behavior
The first benefit is savings, of course. You may save anywhere from 10-50% depending on the insurance company and your driving habits. But some insurance companies offer more than just discounts. For instance, Nationwide offers coaching and feedback on driving behavior. This helps drivers continue to improve their driving and reduce their premiums.
In addition, telematics systems offer fleet managers a view of their drivers’ behavior. This allows them to implement training based on the needs of the individual. Telematics makes you conscious of driving habits. This means you’re more likely to change your driving behavior (or that of your drivers).
Fewer Car Accidents
One of the largest challenges managers face is fleet risk management. Reducing risks and costs to your fleet was once a matter of training and good hiring. Today, this is only one step toward reducing the liability to your fleet company, and the risk to your drivers. Telematics reduces fleet risk in many ways but monitoring driving behavior is the most comprehensive measure. You see which drivers are most impacting your risk management. From there you can train, reprimand, or encourage better performance with incentives.
Telematics gives you real-time and historical data to inform training and hiring decisions. The constant eye on this aspect of your fleet helps to maintain it as a priority. With better driving as a priority, you reduce the risk to your fleet and your drivers.
Processing Insurance Claims
Insurers need as much evidence as possible to help speed up the claims process. Telematics provides analytics support and loss control. In the event of a stolen vehicle, your telematics device has GPS tracking to help you recover it. Telematics systems may also provide after-incident assistance, by alerting managers and authorities. Along with dashcams, the evidence you can offer makes processing a claim much easier. In the case of a lawsuit, this data and footage could save your company thousands.
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Trying to decide whether auto insurance telematics is right for your fleet? First, assess your fleet risks. Consider the road habits of your drivers and how much information you’re willing to share. Then, research your fleet telematics options.
Azuga fleet tracking and telematics help you reduce your insurance costs. But it also helps reduce fuel consumption, prevent maintenance issues, and much more. Learn more about one of the leading telematics solutions for fleets, at Azuga.
