- Pricing and telematics lead the charge as insurtech patents jump 40pc
- FCA puts general insurance pricing practices under review
- Volvo and Baidu reach agreement to produce autonomous vehicles
- Cyber and D&O exposures increasingly intertwined, Airmic report finds
- Arch selects Touchstone for cat risk modelling
MOTOR FLEET RISK: Deriving value from telematics
Written by Graham Buck
Technological advance has seen an increasing role for telematics in managing motor fleet risk. Yet there are a few speed bumps in the way, reports Graham Buck, as he looks at the implications for provision of motor fleet insurance
History was made in the US last October, when the world’s first autonomous truck delivery took place in Colorado. The 120-mile journey was a venture between Uber’s self-driving vehicle subsidiary Otto and brewer Anheuser-Busch, while the cargo itself – 50,000 cans of Budweiser – was significantly less newsworthy than the US$30,000-worth of Otto’s technology on board. This allowed the driver to step away from the steering wheel and simply monitor the journey.
It’s no stretch of the imagination to anticipate driverless vehicles on Britain’s highways by the end of the decade. Nissan recently tested driverless cars in London after earlier tests on public roads in Milton Keynes late last year and the Japanese car maker has announced that its updated Qashqai model and the new Nissan LEAF will be equipped with ProPILOT autonomous driving technology.
Fitch Ratings has issued a report on how the widespread adoption of driverless vehicles will impact the motor insurance sector. The agency expects liability for accidents to shift towards manufacturers, while motor insurers will be forced to diversify and seek alternative profit sources. Not all will be successful.
“The question of who is liable in the event of a crash involving an autonomous vehicle will be fundamental to the future of the motor insurance industry,” comments Fitch. “As the transition progresses, we expect to see risk coverage shifting from personal motor insurance policies to commercial product liability.
“Early indications of this trend can be seen in the UK’s regulatory proposals, which would require compulsory motor insurance for self-driving vehicles but would enable the insurer to reclaim costs from the manufacturer if a crash was caused by technology failure.
“This long-term shift could be exacerbated if the move to driverless cars and the rise of the ‘sharing economy’ result in less individual car ownership, as a smaller overall motor fleet would reduce the risk pool for insurers.”
The Department for Transport is already planning for the advent of so-called ‘two-in-one’ insurance policies for the UK, which would provide cover both for when a driver is behind the wheel and when it is in driverless mode.
The aim is to clarify whether the victims of an accident should claim against the vehicle, its driver, or even the highway authority. The government believes that dual policies will provide those involved in a collision with an automated vehicle with “quick and easy access to compensation”.
René Schoenauer, EMEA product marketing manager for Guidewire Software, says that the debate on where liability attaches when an automated vehicle is involved in an accident has been guided by the Tesla case in the US.
In May 2016 the driver of a Tesla Model S car was killed on a Florida highway when its Autopilot model, which was switched on to navigate the vehicle, failed to recognise an oncoming lorry. According to the company the vehicle’s sensors, which assist the steering of the car by identifying obstructions, did not respond due to the combination of “the white side of the tractor trailer against a brightly lit sky”.
However, the Autopilot mode differs from self-driving technology as it requires the driver to remain engaged at all times with their hands on the steering wheel, so that they can manually override the system in the case of an emergency. According to reports, the hapless driver was watching a Harry Potter film on the vehicle’s TV screen at the time of the collision. “Autopilot is getting better all the time, but it is not perfect and still requires the driver to remain alert,” stated Tesla.
“The liability issue is still one to be determined in future cases,” says Schoenauer. “Do driverless vehicles relieve the user of all responsibility for avoiding accident? Where do you draw the line in deciding where driver liability ends?”
Benefits of telematics
For the best part of the past two decades, telematics has been an integral part of motor fleet management. Originally, the technology was used mainly as a tool for recording the location of a vehicle and how long the driver’s journey had taken. In the early days this provoked hostility from some drivers with telematics dubbed “the spy in the cab”, a sentiment that has steadily dissipated over the years.
Schoenauer notes that in Europe, telematics was first pioneered by insurers in Italy, who noted that introducing a black box into vehicles improved driving habits. He says the UK is relatively advanced in adopting the technology but, perhaps surprisingly, Europe’s largest economy, Germany, lags some way behind – although “telematics has improved claims experience, as well as areas such as pricing and policy models such as pay-as-you-drive based on frequency and mileage”.
Jason Vallint, fleet safety strategist at insurer AIG, is also convinced of the worth of telematics solutions. He notes that since their introduction, both technology and operational costs have reduced significantly, enabling the technology’s potential to be transferred from a purely business proposition to a consumer one.
“The benefits of the systems and the potential mountains of data that the technology can derive is well known,” says Vallint. “There are clear business advantages in terms of fuel savings, fleet tracking, security and – more recently – greater focus on driver behaviour improvements.
“Video camera technology – the ultimate evidence gathering solution for optimised claims defensibility – is also being enabled through lower cost and a more widely-available 4G mobile communication infrastructure.”
Reluctance to commit
Despite these benefits, both technology suppliers and other road risk and safety stakeholders – insurers included – must face the fact that vehicle fleets are still not fitted with telematics as standard. Nor is there much evidence of car drivers demanding insurance-based telematics. Vallint believes there are several reasons behind the lethargic uptake:
• Data ownership, trust and security of data: National legislation, privacy laws and clarity of data ownership has led to limitations of use – especially where the data is stored, which is often offshore. In addition, mobility has been taken for granted as a personal privilege. Having someone (or something) monitor your personal movements is not yet an accepted or trusted concept. There have been too many cases where personal data breaches have led to financial loss or reputational risk, while cyber security represents a growing future challenge to personal and business mobility.
• A competitive marketplace: There are too many telematics providers and types of products on the market, with no clear market leader. This has created confusion, with fleet managers reluctant to commit as they are unsure which solution is right for their company and individuals similarly uncertain.
• Standards: The telematics industry is largely unregulated and lacking in common technical or reporting standards. There are no clear industry technical specifications, component tolerance parameters or quality controls in place. Telemetry devices are free to utilise any component that suits its purpose, with each demonstrating variable abilities to measure and collect data. Technology that has been built into a cost-effective smartphone may not be as robust or advanced as those components used in a dedicated on-board unit, or indeed vice versa.
Consequently, data collection can be highly variable in a like-for-like comparison and it has become difficult to port telemetry profiles of drivers from one provider – or insurer – to another. Given consumer promiscuity in the insurance market, insurers have found it complicated – or are simply unable – to quote for insurance based on another provider’s driver profile, so limiting the benefit or incentive for consumers to adopt.
• Data excess: Often commercial fleet operators that utilise telemetry are overloaded by the wealth of data that is provided, and then fail to convert that data into meaningful information and subsequent action. Telematics is often ‘sold’ as opposed to ‘procured’. Users believe that putting telemetry technology in place simply fixes problems, when actually the problems have only just begun to be identified when telemetry is deployed.
What will come next? Technology providers have developed electronic logging device (ELD) solutions for fleet management that offer messaging via tablets, navigational aids for truckers and global positioning system (GPS) tracking. Vallint adds that connected vehicles, powered by forthcoming 5G telecommunications capability, is likely to replace separate telematics devices as “it’s this future of form of technology that will guide autonomous vehicles of the future”.
This article was published in the March 2017 issue of CIR Magazine.
Download in PDF format
Click here for more interviews and analysis
Contact the editor
Follow us on Twitter