Use of Telematics Lags Behind in Commercial Lines

<p>Usage-based insurance and telematics programs among commercial automobile insurers are lagging compared to personal auto writers, but in some industries, such as long-haul trucking, telematic devices are commonplace, used to improve safety and operational efficiency.</p><p>Telematics hasn't been a "focal point" for promoting business insurance, said <person>Mark Lucca</person>, second vice president, enterprise product, auto for <org value="NYSE:TRV" idsrc="xmltag.org">Travelers Cos</org>.</p><p>More personal lines carriers who are conducting usage-based insurance pilots or have launched a telematics product, said <person>Tom Kavanaugh</person>, director of the insurance practice at <org value="ACORN:4179529145" idsrc="xmltag.org">PricewaterhouseCoopers LLP</org>. A smaller number of commercial carriers are conducting pilots or have actual products in market, "but I think what we're seeing ...is a greater uptake in terms of penetration within the marketplace."</p><p>Some 80% of long-haul truckers have implemented telematics, but not as many smaller fleet operators have, said <person>Robin Harbage</person>, who as a director at <org value="NYSE:TW" idsrc="xmltag.org">Towers Watson</org> is working with several insurers to help them implement telematics and usage-based insurance programs.</p><p>Telematics offer insurers the opportunity to differentiate themselves by bundling services that are related to insurance — safety, reduced loss costs, fleet management, and roadside assistance, Harbage said.</p><p>A major challenge for commercial insurers is the standardization of information, said <person>Donna Glenn</person>, vice president, enterprise product, commercial auto, for Travelers, the largest commercial auto insurer in <location value="LC/us" idsrc="xmltag.org">the United States</location> based on premiums written, according to BestLink, which provides online access to <org value="ACORN:879856307" idsrc="xmltag.org">A.M. Best's</org> database of insurance information. Other challenges include the range of technologies and intellectual-property rights and patents, she said.</p><p>"We recognize the technology has the potential to change how we assess risk for our accounts," Glenn said. Travelers' commercial policyholders own the data collected by the telematic devices. Travelers surveys its policyholders to determine how they are using data to "better control their own risk," she said.</p><p>Liberty Mutual, the second-largest commercial auto insurer, markets its Onboard Advisor program to small- and medium-sized service businesses in 22 states. It bills Onboard Advisor as a safety program and loss-prevention service. Customers who sign up — with two thirds of their fleet covered and with a qualified device from a choice of vendors — initially get a 15% discount on their insurance.</p><p>"We need to reward safe driving," said <person>Christopher Carver</person> with <org value="ACORN:3367986927" idsrc="xmltag.org">Liberty Mutual Agency Corp.</org> and the program manager of Onboard Advisor. He said his company encourages its policyholders to use monthly reports created through Onboard Advisor, because those policyholders who regularly access the data show continuous improvement. "We need to reward people in a way to encourage them to keep it up."</p><p>Telematics devices are used by policyholders as both a safety tool and a productivity tool, said <person>Jim Noble</person>, line of business director for motor fleet at <org>Zurich Services Corp.</org> Leading risk indicators are hard braking, hard cornering, acceleration and speed, and the data can be studied to identify patterns of at-risk behaviors that can be addressed and to create a "culture of safety," he said.</p><p>The programs from Liberty Mutual and Zurich use devices from different manufacturers. Liberty Mutual's telematics device providers include <org>Geotab Inc.</org>, <org value="ACORN:2378140562" idsrc="xmltag.org">Teletrac Inc.</org> and <org value="NASDAQ-NMS:TNAV" idsrc="xmltag.org">TeleNav Inc.</org> Zurich has five providers, including <org>GreenRoad Technologies Inc.</org> Travelers doesn't specify what devices its clients should use. Glenn said there are many reputable vendors.</p><p>While costs for the devices, data transmission and data storage, are dropping, setting up a telematics program is "not cheap," Harbage said, adding that in order to have a success telematics offering, insurers need a commitment from senior management that this is a priority and a person dedicated to the program.</p><p>The companies with the largest market share in the commercial auto market last year were <org>Travelers Group</org>, with an 8.29% market share; <org>Liberty Mutual Insurance Cos</org>., with 6.75%; <org>Progressive Insurance Group</org>, with 6.29%; <org>Zurich Financial Services NA Group</org>, with 5.43%; and <org value="NYSE:AIG" idsrc="xmltag.org">American International Group</org>, with 4.16%, according to BestLink.</p><p>To hear the entire interview with Carver, visit <a href="http://www.ambest.com/media/media.asp?RC=192415">http://www.ambest.com/media/media.asp?RC=192415</a>.</p><p>(By <person>Diana Rosenberg</person>, senior associate editor, BestWeek)</p>