Vehicle Telematics Impact on Insurance Premiums
A recent case study from McCarron Coates Insurance has shown the impact vehicle telematics can have on courier insurance premiums
Average Claims Cost
Claims Cost per Vehicle
Premium Payable Per Vehicle
All figures rounded to the nearest % / £50
The current policy period (2022/23) has not experienced a peak period yet, and allowances for this should be made when comparing data.
The policy was transferred to a new insurer 2021/22 who provided their rate per vehicle based upon an expectancy of the fleet performance to improve following the implementation of telematics devices which were installed in the entire fleet by the end of quarter one 2021/22.
Significant improvements can be seen in the accident frequency and claims cost per vehicle following the implementation of the devices which are a significant focus for underwriters when reviewing premiums. Whilst the average cost per claim increased in 2021/22, this is understandable as the drivers were having fewer low impact incidents which naturally results in a higher average claims cost.
The improvements were mainly as a result of two factors:
· Fleet management implementing processes for reviewing data and sharing this with drivers where appropriate. This resulted in a cultural change within the business and improvements to driver attitude.
· A more proactive approach to claims management, including improved reporting procedures, a third-party capture service and reviewing telematics data to assist with liability decisions.
The improvements made to the policy performance resulted in a premium saving in the 2022/23 policy period.
How can telematics influence insurance premiums?
A large percentage of claims that occur in the courier industry are low impact manoeuvring such as colliding with stationary vehicles or reversing into property. These incident types are a result of driver behaviour.
· If managed proactively, the data provided by the devices allow for problem drivers to be identified. Additional training can be provided, or circumstances can be investigated to improve the driver’s standard, reducing the likelihood of a claim occurring.
· The drivers naturally become more aware of their own driving behaviours when it is known that management staff are reviewing the telematics data and implementing measures to improve the performance, resulting in a lower chance of an incident occurring.
· In the event of an incident, telematics devices will often produce a notification to alert the management, meaning that an incident can be dealt with quicker, which may result in a lower cost of the claim, particularly if credit hire is involved.
· In the event of a liability dispute, the data can be used to review the activities of the driver immediately prior to the incident and assist insurers in making a decision. If the incident is the fault of the driver, it is beneficial to be aware of this from the outset as legal costs will be significantly reduced. On the other hand, if it isn’t the fault of the driver, the data can be used to successfully defend the incident and recover costs from the negligent party.
All of these factors should result in a lower claims cost which is reflected in the premium in subsequent policy periods.