Skyrocketing fuel prices and a 10% jump in vehicle maintenance costs have put fleet carriers in a financial vise.1 However, organizations may be able to save on insurance costs by embracing telematics.
In traditional transportation insurance pricing, underwriters calculate premiums using a variety of factors, most notably Federal Motor Carrier Safety Administration (FMCSA) scores. Insurers assume that a carrier with higher FMCSA scores — caused by accidents, unsafe driving, hours-of-service violations and other incidents — is a bigger risk, which often leads to less coverage and higher premiums.
Telematics offers an alternative pricing mechanism, giving underwriters real-time fleet operations data — including driver safety and vehicle usage information — to price coverage.
Although three million commercial trucks in the U.S. are equipped with electronic-recording devices — required of any Class 8 trucks by the FMCSA — carriers have been hesitant to expand the use of telematics beyond the federal hours-of-service requirement for several issues.2 With today’s tight labor market, fleet companies fear that requiring digital monitoring may deter drivers from joining their fleet. Commercial trucking companies can also face increased liability from an accident if telematics alerted them to a safety issue that they did nothing to rectify.
But implementing telematics or other driver monitoring technology can benefit fleet carriers in a number of ways, including:
- Reduced insurance costs. Fleet carriers that collect telematics data can receive insurance discounts between 5% and 15% annually. Some insurers offer variable pricing over the course of the year for telematics users, with policy discounts tied to rising levels of good driving data. Fleets can also take advantage of usage-based insurance, which bases premiums on mileage driven and driving behaviors. For fleets with exemplary drivers, UBI could result in substantial savings compared with a traditional commercial auto policy, with the fleet paying only for coverage while trucks are on the road.
- Better safety records. With telematics, carriers can identify drivers exhibiting poor driving behaviors or flag undesirable driving trends, enabling them to intervene or retrain to prevent future accidents. Some fleet carriers incentivize safe driving based on telematics data by offering small cash rewords or creating friendly competitions using driver leader boards.
- Improved maintenance scheduling. Rather than scheduling preventative maintenance using a calendar, telematics can help fleets identify when maintenance should be completed based on both the odometer and engine usage. The switch to a telematics-enabled condition-based maintenance schedule can also help identify issues in certain vehicles to help predict vehicle downtime or breakdowns.
- Improved fleet efficiencies. The real-time visibility of an entire fleet that telematics provides can help fleet carriers more quickly identify potential shipment delays and pivot to mitigate the impact of disruptions.
- Recruitment and retention. While some drivers may balk at the idea of telematics, the technology often appeals to younger drivers. From real-time feedback that motivates newer drivers to self-improve, to driver competitions offering recognition and monetary rewards for exemplary driving, the “gamification” of telematics can be a real incentive.
Contact HUB International’s transportation insurance experts to learn more about how telematics can help improve fleet safety and impact insurance prices. You can also learn more about HUB’s commercial trucking insurance services here.
1Fleet Equipment, “Truck maintenance, repair costs continue to increase,” March 6, 2022.
2Transport Topics, “How Trucking’s Adoption of Telematics Has Forever Changed Fleet Management,” June 21, 2022.