Reducing Your Fleet's Risk and Your Company's Auto Insurance Costs through Telematics

What is Telematics software:

Telematics software is a method of monitoring and tracking your vehicles using GPS technology and on-board diagnostics to provide insight into every aspect of your fleet. 

Vehicle telematics can include:

  • Vehicle locations and movement patterns
  • Vehicle weights
  • Diagnostics data related to fuel efficiency and vehicle performance
  • Driving behaviors
    • Aggressive braking
    • Intensity or frequency of acceleration
    • Speeding
  • Distracted driving incidents caused by smartphone usage
  • Video footage from in and around your vehicle

Why implement a telematics program:

  • Visibility into your fleet: a better way to detect exactly where your vehicles are, monitor traffic levels and idle times, design routes, monitor deliveries, and facilitate recovery in the event of theft. 
  • Vehicle maintenance: telematic software can detect a wide range of vehicle maintenance needs such as engine issues and other diagnostic concerns. 
  • Indisputable evidence: camera footage from around your vehicle along with other telematics can prove useful in an accident. Innocent drivers can be exonerated and the fleet can be put back into service much faster, though telematics may create additional risk if your vehicle is at fault, so should be utilized carefully. 
  • Lower insurance premiums: When insurance carriers can see data to prove your fleet risk is lower, it can positively affect your premiums and deductibles. 
  • Continuous monitoring & safe driving: visibility into your drivers whenever using company vehicles. This holistic view allows you to determine categories for your drivers and manage your largest risks. Continuous monitoring also monitors more specific driving habits and detects flaws that otherwise might have gone undetected. This information gives your organization the opportunity to develop policies and structure training around these specific issues before they become major such as aggressive breaking or speeding. 

How using telematics can help lower your insurance rate:

Insurance carriers price coverage based on your fleet's risk factors including miles driven, routes, time of day vehicles operate, number of vehicles in your fleet, driver quality, and loss history. Telematics, when used in combination with a program to monitor driver behavior and provide targeted training, encourages safety forward behavior and reduces accidents. Underwriters will often give credit for effective telematics programs, and the long-term benefits can be considerable as claims frequency is reduced. 

In some cases, the fleet support companies you already use may offer a system for telematics that is less expensive than buying entirely new equipment. Discounts vary depending on the technology you currently have in your trucks, partnerships your carrier may have, and the size of your fleet. Your broker can advise you about potential program discounts offered by your carrier. 

An Alternative for Passenger Vehicles: Vehicle Allowance Programs

In addition to telematics, which can be utilized in fleets comprised of trucks and/or passenger vehicles, companies that offer passenger vehicles for employee use should consider offering a vehicle allowance to employees rather than a company car. With a company-owned vehicle, the owner is taking on the risk presented by employees driving the vehicle for personal use. If the employee is in an at-fault accident while driving for personal reasons, the company's insurance responds to the claim, even if the employee was in violation of company policy. 

Transferring primary responsibility to the employee-driver can be an effective way to reduce risk, but it is essential that the program be strictly structured and enforced. A vehicle allowance program needs to be a well-defined program with parameters for vehicle quality, required insurance limits, and appropriate policy endorsements. It's important to ensure that relevant employees are carrying the right personal insurance coverage and receiving safe driver training. 

While vehicle allowance policies are part of a compensation package and fall under the purview of HR and accounting departments, your insurance broker can assist with helping to define insurance requirements. No approach will entirely insulate a company from claims arising from their drivers, but a clearly defined and successfully executed vehicle allowance program can reduce the risk of taking on unintended liabilities.  

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