Premiums for commercial auto and liability insurance were increasing eight to 14% annually long before inflation became headline news. Experts point to rising litigation costs and the spike in “nuclear” verdicts (settlements more than $10 million) as the main culprits.
A June 2020 hallmark report by the American Transportation Research Institute (ATRI) charted an increase of 967% in the average verdict amounts between 2010 and 2018, from more than $2.3 million to nearly $22.3 million.
Fast-rising prices for vehicles and parts have also contributed to ballooning costs of accident claims. Insurers are hiking premiums to outpace inflation, but some are using technology innovations to slow or even reverse pricing trends.
Insurance companies and fleets have benefited from the paradigm shift in risk management created by camera-based fleet safety and telematics systems. Fleets are using the technology to proactively manage risky driving behaviors, and some insurance companies have products that leverage data from these systems to give fleet customers more accurate pricing and ongoing discounts for lowering their crash risks.
The "Insurtech" Paradigm
Commercial auto insurers have traditionally been slow to adjust rate structures for new developments that can improve vehicle and driver safety. One reason for the hesitation is that state agencies regulate insurance with a patchwork of laws that make it difficult for new companies to enter the market and change their processes for underwriting policies, filing rate structures and offering policy discounts.
Even with state regulatory constraints, a number of companies have entered the “insurtech” market with telematics-based solutions that offer lower rates. Original equipment manufacturers (OEMs) are helping to fuel growth in the insurtech market by offering new products to customers as a package deal.
In the consumer space, Tesla launched an integrated Tesla Insurance offering in 2019 that reflects the manufacturer’s confidence in the safety benefits of its active safety systems and driver-assistance features. Tesla Insurance is competitively priced and offers discounts of up to 30% based on a risk scoring model.
Likewise, in the commercial auto market, OEMs are bringing integrated services and offerings to customers who buy or lease trucks. Last year, Daimler Truck Financial, a division of Daimler Truck North America (DTNA), made an investment in High Definition Vehicle Insurance (HDVI) as part of its plan to provide customers with insurance offerings that are integrated with vehicle ownership life cycles and usage.
Video Technology and Proactive Risk Management
Getting immediate savings on insurance may not be the payback fleets expect when investing in video-based safety systems. They may assume it will take several years to prove sustainable results. The two most common reasons fleets invest in the technology are to reduce accidents and protect their companies and drivers from fraudulent claims.
When accidents do happen, safety managers can immediately review event video and vehicle parameters—speed, location, and more—to determine who is at fault and respond accordingly. False claims can be prevented by immediately sending a video clip to the driver and to the police officer at the scene, said Trimble Transportation Global Business Development Manager, Video Intelligence, Jesse Chappell.
Getting video evidence to the scene as quickly as possible is critical, he said, because “once an accident report is written, it is difficult to go back and rewrite it. With video, you can get it right the first time.”
Alternatively, if the evidence shows liability, fleets can save money by settling claims faster to avoid protracted litigation, he explained. Over the long run, Chappell said that video safety systems can reduce insurance costs by changing driver behaviors to avoid accidents and providing drivers with greater visibility and awareness of risks in their environments by:
- Coaching: Video safety systems can monitor and score a wide range of unsafe driving behaviors. Fleet managers can use the scores and videos of safety-critical events to proactively reduce accidents and insurance costs by giving drivers positive and constructive feedback, he said.
- In-cab alerts: Advanced camera systems use high-speed processing and artificial intelligence to alert drivers instantly to risky behaviors such as unsafe following distance, cell phone use or other distractions.
- Eliminating blind spots: Trimble Video Intelligence has an optional Driver Assist feature. When a driver uses the left or right turn signal, the feature shows live video on the in-cab display from cameras mounted on the front hood of a vehicle. The cameras give a 110-degree view (two lanes wide) from front to rear. Nearly 45% of Trimble Video Intelligence customers use Driver Assist, which includes an option for a rear camera that activates when a driver shifts into reverse, Chappell noted.
Besides making their fleets safer, motor carriers that use video technology to proactively manage risk can gain better negotiating leverage with insurance providers during policy renewals. Fleets can show how they have lowered risky behaviors that directly correlate with crash risk reduction, Chappell said.
Trimble Video Intelligence, for instance, has a metric that tracks the number of miles between risky events such as hard braking, swerving and speeding. Fleets can track and visualize trends for these and other data points and compare their results with aggregate data from fleets of similar size.
A small but growing number of insurtech companies now offer dynamically priced products for fleets that use video and telematics systems. The products adjust monthly rates to reflect safety improvements fleets are making.
HDVI connects to a fleet’s ELD solution and also pays for the hardware and subscription costs for the fleet to use video telematics. Its 12-month policies include the technology for a competitive base rate. The company’s HDVI Shift product then rewards fleets with monthly discounts of up to 12% for safe driving behaviors.
HDVI has a web portal with a dashboard that its customers use to track key safety metrics. The company has monthly consultation calls with customers to review trends in the data. Its human support and services help fleets sharpen their focus on efforts that improve safety and reduce insurance costs. The company also has a mobile HDVI Driver+ app that gives insights into safe driving practices, gamification features and financial rewards.
Fleet customers know what their next payment will be in advance. Policy premiums can never go above the initial base rate; they can only get better during a 12-month policy.
Charting the Savings
HDVI Shift is available for fleets of all sizes, but the company has found that fleets with between 10 and 99 trucks have the most interest since they generally have lower self-insured retention (deductible) and because they “need a lot of help around managing safety,” said HDVI Chief Product Officer and Co-Founder, Reid Spitz. “We feel we can really have an impact on risk there.”
Within the first quarter of a new HDVI Shift policy, the company’s data show that 75% of customers get safer on the metrics of harsh braking and speed. By the second quarter, 90% had improved. Within the first six months, most fleets are getting discounts of 7% to 8% on their insurance.
HDVI is planning to provide an upfront discount to qualified fleets based on a review of their last 90 days of historical telematics data. The company is exploring ways to use safety data to further refine how it assesses and segments risk, so that the safest fleets may be able to earn deeper discounts, Spitz said.
HDVI uses a predictive model for crash risk based on a telematics dataset of speeding, harsh braking and other risky events according to the time of day, geography and other parameters.
The dataset has more than five billion miles of telematics and crash data for class 8 trucks. The company’s model creates a crash prediction score for each customer, and its current book of business has a 30% lower score than the overall trucking industry, Spitz said.
HDVI is currently available in Alabama, Arkansas, Georgia, Illinois, Indiana, Michigan, Minnesota, Missouri, Ohio, South Carolina, Tennessee, Texas and Wisconsin. The company has integrations with a wide range of video telematics devices, including Trimble Video Intelligence.
Free eBook Details How Video Technology Can Fit Your Fleet
New advancements in video-based safety and telematics systems are helping fleets positively change driver behavior and prove they are becoming safer. This proof gives insurance companies the confidence to dynamically assess risk and immediately reward fleets for achieving results.
Curious about how video technology can help your fleet improve safety and lower your accident risk? Check out our free eBook to get an up-close look at how these solutions work and how they can help support you and your drivers.