What to consider when evaluating insurance options for commercial fleets
From the February 2017 print edition
Because insurance is often one of the top three fleet expenses, fleet managers focus as much on managing and controlling this cost as assessing the evolution of the vehicle technology and insurance products that are available to protect their investments.
“Fleets do shop around, not necessarily to change their insurer, but to keep abreast of what various insurers have to offer and/or what is evolving in the marketplace,” says Paul Wingate, strategic consultant, Element Fleet Management.
When evaluating insurance requirements, fleets and their insurers/brokers consider a wide range of factors and as commercial rating becomes more sophisticated, different insurers rely on more variables. Traditionally, insurers look at the numbers, types and ages of fleet vehicles, how the vehicles are used, where and how they are driven and where they are parked/garaged as well as the firm’s claims history and the drivers’ records. They also consider vehicle pooling or sharing, employees’ personal use of company vehicles and non-employee drivers.
“The weight of these factors varies from company to company, fleet to fleet and will impact proposed premiums accordingly, but depending on the insurer, there is a trend toward weighting these usage-based factors more heavily than in the past,” says Wingate. “Talk to your insurer/broker to better understand the weighting and other factors, because you may be able to modify your fleet’s usage policy without affecting the business requirements and earn a cost reduction.”
As fleets do everything possible to maximize productivity and efficiency, they’re leveraging telematics, which are more sophisticated and affordable than ever, to identify the safest, most efficient routes, distance, speed, traffic lights, congestion, construction and the riskier left-hand turns are just a few of the considerations. Telematics can also monitor driver behavior and most experts believe drivers are more cautious when tracked and held accountable. Responsible fleets, which are dedicated to employee and public safety while protecting the firm’s corporate brand and image, can caution at-risk drivers and offer additional education and training.
Some fleets have also successfully shared data with their drivers and through friendly competition have been able to positively change the overall driver performance, says Romy Bria, director, Fleet Management, ARI.
To date, telematics remain more popular with commercial than sales fleets and Wingate says insurers may offer fleets with telematics’ data five- to 10-percent discounts. However, right now, insurers still categorically bill fleets based on the drivers’ ages and genders as well as the firms’ claims and accident rates. True usage-based insurance would access individual drivers’ data to levy higher premiums on at-risk drivers with a pattern of aggressive behaviour such as speeding, excessive acceleration and hard-braking and cornering and give fleets a price break on their most responsible drivers.
“Telematics for commercial vehicles is used primarily to manage fleets rather than as a premium determination level,” says Martin McCombie, National Commercial Underwriting, Aviva Canada. “If telematics result in better driver management and claims history improves, then the fleet rates will be reduced as a result.”
Privacy legislation limits the data insurers can access without consent and while privacy is a universal concern, Pete Karageorgos, director, Consumer & Industry Relations, Ontario, Insurance Bureau of Canada, the national industry association, firmly believes that in a fleet environment—where the company vehicles are work tools provided to employees who travel publicly funded roads—public safety should precede individuals’ right to privacy.
Despite the fact there are now more vehicles on the road, general injury rates resulting from vehicular crashes have been reduced due in part to vehicle improvements and safety devices, notes Aviva Canada’s McCombie. Beyond telematics, the increased presence of safety technology, such as lane-assist and back-up cameras, may also help reduce both the severity and frequency of collisions. Experts such as Karageorgos stress that the technology is meant to help good drivers become even better drivers and that it may give bad, inattentive and tired drivers additional support.
“The driver represents the vast majority of the risk in the operation of the vehicle and this applies to the use of vehicle technology,” says Aviva Canada’s McCombie.
As an example, a device may notify the driver that a turn or lane change hasn’t been indicated but the onus will always be on the driver to consistently and appropriately use the turn signal.
“Ultimately, the driver is still in control of the vehicle and has to be fully focused on the task at hand,” says Karageorgos.
In time, it’s likely that safety-related technology and its impact on claims will be reflected in the data that’s analyzed by the insurance industry. Its Canadian Loss Experience Automobile Rating (CLEAR) system uses insurance claims data to determine the likelihood that a specific vehicle will be involved in a claim and the probable cost of that claim.
“This underscores the importance of discussions with an insurer/broker related to the choice of vehicles and how this may affect rates and may add an additional consideration to a company’s annual vehicle selector decisions,” says Wingate.
While dash cams may not be considered safety equipment per se, they may affect driver behaviour and they can protect both the driver and employer by acting as a “witness” in the event of a collision. In conjunction with telematics, dash cam footage may help explain a driver’s evasive action and facilitate and expedite the investigation and claims process.
“We often behave differently when we know we’re being monitored, but most importantly, the dash cam corroborates your driver’s story and it’s no longer your driver’s word against someone else’s,” says Karageorgos, who remembers a dash cam proving that a driver had been on the phone when his vehicle struck a couple’s van.
In 2017, it’s impossible to predict when there will be a significant number of autonomous vehicles on the road, but the general consensus is that autonomous features and fully autonomous vehicles will further reduce the volume and severity of accidents.
“At what point the vehicle manufacturer versus the driver will be held responsible for claims is another important issue under consideration,” says Wingate.
Fleets’ commitment to specific safety practices (hiring), policies (safety culture, distracted driving, winter tires), programs (driver education, in-car training), equipment (immobilizers, alarms) and communications may help reduce claims and subsequently rates. Every firm should confirm that its drivers have read, understood and acknowledged the company’s fleet policy before being handed the keys to the company vehicles. The fleet policy should also address when and how driver safety training is provided and the consequences of driver behaviour, ideally both the positive and negative.
“Previously, the individuals that are responsible for health and safety and fleet tended to operate independently of one another, but now, there is a definite trend toward them working together, especially when it comes to training and the content and wording of anything that is accident- or risk-related in the fleet policy or directive provided to employees,” says Wingate.
In addition, policies and enforcement related to compliance with government regulations, for example, driver distractions, smoking in the vehicle, medication, alcohol, illegal drugs and restrictions on the use of communications devices, are also vital.
“Insurance firms welcome loss prevention initiatives although discounts and surcharges vary by insurer,” says Sharon Sproxton, director, corporate commercial lines, Intact Insurance, which offers the national fleet telematics program My Fleet Solution. “Generally speaking, accidents could have a big impact on insurance rates and so anything that would prevent the likelihood of losses would affect premiums.”