Perspective: Trucking’s Telematics Systems Are Only as Good as the Losses They Prevent
Rising insurance premiums are a perennial stress for many motor carriers, many of which are now installing telematics systems with the latest safety technologies to mitigate cost increases. This is a positive trend for the trucking industry, and more carriers should fully embrace these technologies as they soon will become necessary to operate a safe, efficient and, ultimately, more profitable trucking fleet.
Motor carriers that install telematics systems in their trucks often assume it will immediately reduce their insurance premiums. Telematics systems, which use onboard hardware to capture and transmit information to a carrier’s back-office operations, can provide data as granular as individual driver seat belt use and hard braking; or, the data can be as expansive as average fleet speed. If properly used, these systems can reduce a carrier’s overall costs related to safety incidents. However, insurance premiums are likely to only be marginally impacted.
In an age of “nuclear verdicts” against motor carriers — which range from $10 million to $247 million — insurance companies must closely monitor their bottom lines to make sure they are accurately pricing risk.
Telematics data is a useful tool to more precisely calculate risk. However, the algorithmic method by which insurance companies determine an individual motor carrier’s insurance premium does not lend itself to much personalization based upon carrier-specific telematics data.
Insurers examine a motor carrier’s three- to five-year claims data when setting premiums, which means the carrier may get a small discount for adding safety technologies, such as inward-facing cameras or collision mitigation and avoidance systems. The real discount, though, will be realized in three to five years if those devices have had a measurable impact on the carrier’s claims data.
In brief, telematics systems are only as good as the losses they prevent.