For nearly a decade, commercial vehicle insurers have faced rising combined ratios, and thus difficulties remaining competitive in a transforming industry.
“Pricing increases alone have been insufficient. The chronic underwriting losses in commercial auto in the last eight years reveal a need for change in several areas including risk selection, underwriting practices, and claims.”
– James Auden, Managing Director, Fitch’s Insurance Ratings Group, Reinsurance News
More vehicles on the road (and more miles driven), worsening driving behavior including distracted driving, and high demand for commercial drivers have led to high loss frequencies. Related to poor driving behavior, the Federal Motor Carrier Safety Administration (FMCSA)’s Large Truck Crash Causation Study showed that 87% of all crashes where commercial vehicles were at fault were due to driver errors, with 38% due to driver decision errors like speeding.
Severity has also increased due to inflation, leading to higher costs for parts and labor, as well as skyrocketing litigation and health costs.
Of course, rate increases and big drops in driving due to the pandemic turned 2020 into the year commercial vehicle insurers saw their best underwriting results in a decade. But prior trends tell us this luck likely won’t last, especially as the pre-pandemic numbers of drivers on roads return.
“...future profitability [in commercial auto insurance] may be challenged as driving activity returns to past norms, while claims severity patterns remain problematic and pricing momentum may have peaked.”
- Insurance Journal, May 2021
Above all, a big challenge across the industry remains: the lack of data. Filling a gaping hole of missing information around driving behavior would help insurers understand fleet risk and improve overall operations for their clients.
The solution? New-age, smartphone-centric telematics programs, powered by the right Mobility Risk Intelligence (MRI) provider. Below, we’ll explore how MRI helps insurers remain competitive in a transforming, increasingly data-driven industry - now and in the future.
Sure, telematics is nothing new. But Mobility Risk Intelligence providers, equipped with state-of-the-art technology, massive amounts of reliable data, and a truly global presence, are breathing new life into the programs of the past.
Originally, the commercial auto insurance industry has been slower to adopt telematics solutions versus the personal lines market.
Reasons for this vary from insurer to insurer. For one, the lack of adoption may be because commercial insurers wanted to dodge tech costs. But today, smartphone-centric solutions that don’t require additional hardware fees are low-cost and highly scalable, introducing an economical option to the industry.
They’ve also been inherently a high-touch business, involving a broker in almost every case, and were thus slow to embrace digital transformation. And when it came to their business customers, some commercial drivers were initially anti-telematics, perhaps not wanting their employers to follow their driving behaviors. But this perception is also changing.
“Commercial drivers were [quite] anti-telematics at the offset. They didn’t want their bosses paying attention to every move they made behind the wheel. But again, that perception has changed over time as drivers realize the benefits of telematics solutions.”
- Insurance Business America, December 2020
Ultimately, insurers and their policyholders are realizing the strong value proposition for leveraging Mobility Risk Intelligence. The right usage-based or behavior-based solution will use massive amounts of data to:
When all of these benefits related to vehicle care, driver safety, and overall business efficiency weave in with commercial vehicle insurance, it gives businesses an opportunity to substantially save on their premiums. These savings can lead to better products and services for consumers.
So with safety and efficiency on businesses’ minds, commercial telematics programs have transitioned from nice-to-have to must-have solutions for operating fleet-focused businesses. In fact, 93% of mid-market business owners would be willing to invest in telematics if it would improve driver safety, and 90% said that the benefits outweigh the financial cost of the technology.
And in a 2021 survey of its business customers, Farmers Insurance found that 75% said they would use telematics technology if it meant additional savings on their insurance policy.
There’s no doubt that today, commercial vehicle insurers who choose to embrace digital solutions are reaping the benefits.
And those who invest in smartphone-centric telematics programs are unlocking effective, low-cost ways of reversing their climbing combined ratios. That’s all while strengthening their policyholders’ overall fleet safety and business efficiency, empowering them to make better data-driven decisions in an industry that’s long suffered from a lack of data.
As for the next steps in commercial insurers’ behavior-based journey, it’s important to understand what’s in an effective, robust behavioral fleet risk management solution. So in closing, here are some of the top features to look out for when choosing a Mobility Risk Intelligence provider.
Learn how Zendrive’s behavioral fleet risk management solution does all of the above and more, or book a call directly with one of our experts below.