The world of insurance is undergoing a transformation, driven by advancements in technology. Among the most notable developments is the use of telematics data to create personalized and dynamic Behavior-Based Insurance (BBI) programs, even for commercial auto customers. This innovative approach not only benefits businesses but also enhances risk assessment accuracy and promotes safer driving practices across fleets. This is especially true for commercial drivers when coupled with responsive feedback and training programs. In this blog, we’ll explore ways commercial carriers can leverage telematics pricing models to personalize BBI programs for their customers.
Telematics Data: A Game-Changer for Commercial Auto Insurance
Telematics data, collected through GPS systems, OBD-II devices, ELDs (Electronic Logging Devices) and cameras, offers a wealth of insights into driving behaviors, vehicle usage patterns, maintenance needs and more. Until recent years, commercial carriers relied exclusively on credit scores, MVRs and historical claims data for pricing. Now, these data sources can be modeled alongside real–time, behavioral trip data to gain a more complete view of a customer’s fleet.
For commercial auto insurers, this data is a goldmine of information that can be used to redefine how insurance premiums are calculated and driving habits are incentivized. The kicker? More than 75% of fleets already using telematics are practiced in sharing their telematics data with at least one fleet management service provider, according to Penske’s 2022 Telematics Use and Trends report. They’re just waiting for insurers to catch up to the mobility trends.
Tailoring Telematics Pricing Models for Commercial Fleets
While Behavior-Based Insurance has traditionally been associated with personal auto insurance, its potential in the commercial auto sector is equally promising. Telematics data enables insurers to tailor BBI models to the unique needs of businesses with fleets. By analyzing data such as distance traveled, routes taken and driving behaviors, insurers can understand the risk profile of a commercial fleet client. Creating these profiles can be as easy or complex as you’d like based on whether you choose to dedicate in-house resources or work with an experienced partner to aggregate and normalize the data collected.
Findings from Deloitte’s report on The Future of Automotive Mobility to 2035 reveal — what many of us in the industry have already concluded — that, “…sector players may need to develop or acquire new advanced capabilities in several areas…mobility providers may seek strong mobility collaborations to help ensure the success of new product offerings.” There will likely be a wide range of telematics data sources from different fleets, and the key to building a BBI model that delivers is making sure that the data can be used efficiently across the board.
Driving Safer Behaviors and Reducing Risk
Gone are the days of determining commercial auto insurance premiums based solely on demographics and industry averages. Commercial auto telematics data allows insurers to delve deeper into the driving habits of individual drivers and vehicles. From abrupt stops and aggressive acceleration to adherence to speed limits and safe lane changes, insurers can now craft personalized telematics pricing models that reflect real-world behaviors. Once the driving trends have been identified, you can shift focus to how to reduce risk. Using telematics data allows carriers to easily zoom out and get a deep understanding of the context that commercial drivers are operating within. Getting insight into factors like traffic density and road conditions provides a more complete view of driving patterns and behaviors that benefit both fleets and insurers.
The power of telematics-driven BBI extends beyond just pricing adjustments. Insurers can actively influence safer driving habits within commercial fleets. By sharing insights and feedback from telematics data, clients can encourage drivers to adopt better practices, leading to reduced accident rates, lower repair costs and, ultimately, fewer insurance claims. Insurers can also establish programs that tie higher-risk events, like distracted driving, to targeted behavior-based training content for the driver.
With shared access to these insights, risk engineers and brokers can work with commercial clients to better understand where pockets of risk exist within a fleet and target those areas to mitigate and prevent claims.
Dynamic Pricing for Commercial Fleets
One of the key advantages of leveraging telematics data is the ability to introduce dynamic pricing for commercial auto insurance. Just as in personal BBI, commercial fleets can benefit from adjustments in premiums based on driving behaviors. Safer drivers and well-maintained vehicles can enjoy cost savings, while riskier behaviors are met with higher premiums, creating a financial incentive for better driving practices, behavior-based training and operations management.
Telematics data provides insurers with a more complete view of each driver’s risk profile. This data-driven approach goes beyond standard risk assessment methods, allowing insurers to make more accurate underwriting decisions. By identifying high-risk behaviors and patterns, insurers can tailor coverage and pricing to reflect the true risk associated with each commercial fleet and work with their customers to make improvements.
Customer Engagement and Partnership
Commercial auto insurers embracing telematics-powered BBI foster a stronger partnership with their clients. Fleets appreciate the fairness and transparency of BBI, as their premiums are directly linked to their real-world actions, leading to a more equitable insurance relationship. Businesses that are looking to improve in the areas of safety and training along with achieving better insurance premiums are the best to partners for BBI. At a higher level, commercial carriers can attract fleets with an ideal risk level, and fleets can access insurance coverage that more accurately represents their risk profiles, leading to better alignment between coverage and actual risk exposure in the long term. Furthermore, businesses gain real-time insights into their fleet’s performance, allowing them to take proactive measures to improve safety and efficiency. This increased transparency fosters a collaborative environment where insurers and businesses work together to mitigate risks facilitating a pathway to stronger lifetime value in the relationship.
Final Thoughts
Telematics-enabled BBI holds immense promise. As technology advances and adoption increases, this will open doors to further innovation in the commercial auto insurance sector. According to Samsara’s 2023 report on The State of Connected Operations, “Connected Operations Leaders are nearly 2x more likely to exceed revenue goals compared to those in the beginning stages of digitization.” Fleets have initially invested in telematics for operational improvements but are beginning to use behavioral events to improve safety within their business. With adoption increasing, commercial insurers who invest in telematics for pricing and risk control will feed the flywheel of stronger profits across the insurance industry.
The incorporation of telematics data into commercial auto insurance represents a significant leap forward in risk assessment, pricing accuracy and road safety. By creating personalized and dynamic BBI models, insurers empower businesses to promote safer driving behaviors while enjoying tailored premiums and higher profit margins. As the industry continues to evolve, telematics-driven BBI stands as a beacon of innovation, transforming how insurers and businesses collaborate for a safer and more efficient future.
To learn more about how carriers can encourage safer driving habits and achieve higher profit margins, download our white paper, Can Deeper Data Insights Save the Commercial Auto Insurance Industry?.
